Does Facebook need to build a search engine? The social network has become an important traffic source not only to company Web sites, but search engines like Google and Bing. So important that Goldman Sachs and other investors infused the company with $500 million, according to reports. Maybe the industry needs to widen the definition of the phrase "search engine."
Taking a look at the possibilities, we dip once again into J.P. Morgan's report Nothing But Net: 2010 Internet Sector Outlook. With so many interesting insights I couldn't help do it again. So, here we go:
Google currently generates about 36% of all online ad revenue by being at the center of the ecosystem, according to J.P. Morgan, but Facebook proves to also do its share. Citing comScore, the report notes Facebook traffic to the New York Times rose 66% in October 2010, up from a year-ago month, while traffic from Google fell 2% during the same time period. Traffic from Facebook to Amazon sites rose 328%, compared with traffic from Google fell 2%, and traffic to eBay from Facebook rose 81%, while traffic from Google fell 3%.
Facebook became the top referral Web site for NHL.com late last year. The National Hockey League's official web site has seen an 80% increase in referral traffic from Facebook, as members read and share articles, scores and videos. "Facebook users scored higher in average visits (7 to 3), video starts (12.1 to 5.8), articles read (4.8 to 1.5) and total minutes per visit (41.4 to 12.5)," according to the Sports Business Journal.
During a presentation at the Search Insider Summit last month in Park City, Utah, Wedbush Equity Analyst Lou Kerner called Facebook "the second Internet," with time spent on Facebook and page views surpassing Google search. It's pretty clear from the numbers provided by the NHL and J.P. Morgan this trend has no intension of slowing.
I agree with Kerner's view that social signals will become more important to search, especially as time spent on Facebook continues to drive more searches. Building engines like Google or Bing takes more than desire and cash. It would be pointless and a waste of time for Faccebook to develop its own search engine. The company has discovered a way to drive ad revenue without creating its own search engine.
Numerous studies indicate Facebook has become the first destination in the morning for many members. They check the status of friends and tend to their gardens in games such as FarmVille, logging in to check the status of farm animals or livestock. Even prison inmates use smuggled phones to play the game. When all is said and done, global digital gaming market should hit $20 billion in 2010, up from just under $16 billion in 2009, according to the J.P. Morgan, which cites Electronic Arts stats.
Don't think it stops at social games. The Home Buying Institute launched a survey Monday to find out who uses Facebook when buying a home.
In an unrelated story that I just couldn't let pass you by: Facebook founder meets with Baidu during China holiday. And don't forget that Bing provides Web search for Facebook. That should give you enough to think about for the rest of the day.
How would you redefine the term "search engine" and do you think Facebook has found the formula to do without?