Additional analyst comment has been added to this story.
SAN FRANCISCO (TheStreet) - Facebook (FB) announced its Graph Search technology at a closely-watched press event this week, and while Wall Street didn't react favorably to the announcement, I believe investors are missing the forest for the trees.
CEO Mark Zuckerberg and Facebook executives Tom Stocky and Lars Rasmussen, both formerly of Google (GOOG), announced the new product designed to help users find more about their friends, what they like, and where they've been, in order to make their own lives easier. While Zuckerberg stressed this product is in beta right now (it's only rolling out to hundreds or thousands immediately and is not available on mobile yet), it's clear that Graph Search has great potential.
As users continue to tag photos, 'like' pages, and import data to their Facebook pages, Graph Search will get smarter and its recommendations better. Zuckerberg stressed that Graph Search is not the traditional web search done by Google, Facebook partner Microsoft (MSFT) and others, but much more. "Graph search is really powerful," he said, during his presentation. "This is really neat stuff. It's one of the coolest things we've done in a while."JP Morgan analyst Doug Anmuth believes that this will hit Google, as more results eventually show up in Graph Search, and not on Google. "Google's stated mission is to organize the world's information and make it universally accessible and useful," he wrote, in a research note. "However, as Facebook's mapping of the social graph rapidly expands, more and more of that information will reside on Facebook and be included in Graph Search, not Google's search results." Anmuth notes that Graph Search is not a replacement for Web search, but may be more useful, and, given the limited scope of the project now, may eventually become extremely useful. "Graph Search may not have the near-term revenue impact of some other initiatives that the Street was looking for in Tuesday's announcement, but we think it makes Facebook's data far more useful by giving it greater shelf life and surface-ability, which should deepen engagement on the site," he wrote. The analyst rates Facebook "overweight" with a $35 price target. Right now, Graph Search mainly focuses on photos, places, people and useful things as its four major pillars, but there's more to come, according to Zuckerberg. Graph Search works by indexing users' connections. If you or your friends don't want something to be searchable, however, privacy settings on your account can keep those embarrassing photos hidden. Most of the information, at least initially, seems as if it will come from a user's friends, but there's also a way to search across people who aren't your friends to provide the most useful answer. Advertisers will eventually eat this up, helping generate a new revenue stream for Facebook. "This could be a business over time," Zuckerberg said, but noted that the social network first needs to turn Graph Search into exactly what people want.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV