Thursday, October 30, 2014

Facebook Touts Search in Q3 Earnings: Is Zuckerberg Aiming to Out-Google Google?

The platform's search initiative could increase usage and bring in more ad revenue.
Facebook's third-quarter earnings beat analysts' expectations, with the social network reporting earnings per share of 43 cents. However, executives also described the company's initiative to improve and expand its search capabilities, which ─ when coupled with its growing amount of user-generated content and proprietary customer data ─ will help it attract more advertising revenues in the future.
Kicking off the company's earnings call, chief executive (CEO) Mark Zuckerberg reminded listeners of the goals the company identified last time for the next phase of the company: connecting everyone, understanding the world, and helping to build the knowledge economy. In fact, during the call, executives sounded like they'd taken a page from Google's ambitions to change the world, catalog its knowledge, and make it accessible.
Google has been talking about connecting the world for at least a couple of years. For example, the search giant has experimented with installing free broadband in some American cities, and is reportedly looking at satellites and other means of bringing the Internet to countries in Asia and Africa.
In August, Facebook launched with partners including mobile phone hardware and software providers Qualcomm, Samsung, and Ericsson. Facebook's mobile usage continues to expand, accounting for almost half of all usage. Mobile daily users were 703 million on average for September 2014, an increase of 39 percent year-over-year, while mobile monthly users increased 29 percent year-over-year.
"Understanding the world" sounds a lot like Google's Knowledge Graph. Facebook is working to make user-posted content more searchable – and more intelligible. Zuckerberg said, "Over the past 10 years, an amazing base of knowledge has been built up. Now, we're trying to find different ways to expose that and make it more useful to people." Building services, including the beta version of Graph Search, will be a big focus for the company in the next few years, he added.
Zuckerberg said that while the body of Web content generated by Facebook is approaching equal size with all other Internet content, they address different use cases with different kinds of knowledge. Since a good proportion of what people post on Facebook is links to content hosted elsewhere, it's interesting to consider whether ─ at least for some kinds of searches ─ Facebook search could supplant Google search.
Search certainly worked well for Google advertising, and it could do the same for Facebook.
Facebook's total third-quarter revenue was $3.2 billion, an increase of 59 percent, including ad revenue of $2.96 billion, up 64 percent year-over-year. Mobile ad revenue represented 66 percent of total ad revenue, up from 49 percent in the third quarter of 2013.
That seems to represent a significant chunk of all mobile advertising. According to IAB and PwC, global ad revenue in the first half of this year reached $23.1 billion, due to a surge in mobile ad revenue, to $5.3 billion from the $3 billion reported at half-year 2013.
This October, the Facebook Audience Network went global, supporting link ads in addition to banners, interstitials, and native ads.
"We think our ad products and services are so unique," chief operating officer (COO) Sheryl Sandberg said.
Adding to its ability to siphon up user data for ad targeting is Facebook's dominance in social logins. According to Janrain, in Q3, Facebook accounted for 46 percent of social logins, compared to Google's 34 percent.
Adobe's Q3 Digital Advertising Report found that Facebook posts by the media and entertainment vertical were up 100 percent year-over-year, while the retail industry had the largest increase in post interactions, up 13 percent year-over-year.
Sandberg said that Facebook is making progress with brand advertisers, "brand by brand, because with our targeting, we are able to identify people who are in the market to buy a car, for example. Our ability to target means we have a strong play in every vertical."
Adobe expects Facebook's paid impressions to grow 10 to 20 percent next quarter, during the holiday shopping season. Whether that growth comes at the expense of Google remains to be seen.