12/01/2010

By John Straw, CEO, Linkdex

It's always been a question of when, not if or even how. I am, of course, referring to the launch of Facebook Search, the only thing on the horizon that really makes Eric's knees shake.

When will Facebook Search launch? Friends and investors in Silicon Valley say May, followed by an IPO (and what a pre-cursor for an IPO) in Q4 next year. You can bet that flush with cash Facebook will then go onto devote oodles of cash and resource into dominating local, the final frontier.

How? This is the interesting part. Lets looks at circumstances, flashes of strategic and corporate genius (yes, they do happen) and Apple’s long term role. Firstly, Microsoft. Three years ago Microsoft paid $240 million for a 1.6 per cent of Facebook. Much comment about an 80s dinosaur overpaying for a cheeky start-up followed. It’s starting to look like bargain basement now. Especially if Bing helps power the long tail of Facebook search, and sells the PPC advertising on it.

The real genius to Facebook ambition is "Like". Google works it's algorithms by looking for "flags of approval" in the form of links. Facebook looks for flags of approval from human intervention, "Like" - 650m people making collective decision on what’s good and what's not good. But the web is a big place and even 650m people aren't as scalable as Google's algorithm. What will Facebook do for long tail search? Easy, borrow long tail stuff from Bing who I'm sure will be more than happy to oblige. And, whatever you think of MS, Bing is a fine search engine. And in the process why not have Bing sell whatever Facebook’s equivalent of adwords is. Oh and in the process Bing also has a great mapping application for Facebook’s ambitions in local. Marriage made in heaven, loads of consummation.

Where does Apple sit in all of this. Pretty would be a good word. Apple is keen on anything that gives Google a bloody nose. People are buying Apple's beautiful hardware in ever higher numbers and Facebook apps for iOS are well regarded. Sure Facebook may well bring to market a low end Facebook phone next year but it won't hurt iOS sales. So this looks like an unholy (if not unlikely) alliance between Facebook, Microsoft and Apple. Google beware.

What does this do to Google valuation and long term financials? I asked Nick Wood, an ex hedgie and VC investor, "Google is the dominant player in search with a massive market share, outstanding people and a extensive pipeline of products. The mere announcement of a competitor product from Facebook is unlikely to have any impact on its share price. They'll have to start making a dent it Google's business for investors to take notice and this will take some time, and real skill on Facebook's part. The more likely big impact on Google's price is rumours of action by the US Department of Justice to address potential dominant market position - as was the case for Microsoft some years back."

Where does this all end? Choice for advertisers which has to be a good thing.

John Straw is CEO of VC backed www.linkdex.com - which is intending to bring end to end SEO to small businesses later this year.

Learn more from John at HIT ME! Optimise Your Search on the 15th of February 2011 at Microsoft’s London Head Quarters. Tickets still available — Buy yours today and save £100!