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Facebook Graph Search: First Impressions (Update 1)

Stocks in this article: FB MSFT GOOG YELP

Topeka Capital Markets analyst Victor Anthony thinks that Facebook will eventually make money from Graph Search, but not right now.

"Missing from the presentation was a monetization component of the social search engine, and this is likely the key reason why the stock has pared back recent gains (along with a sell-the-news trade)," he wrote, in a note. "We caution investors not to take this short-sighted view as this is just the beginning stages of what we believe will be a huge monetization lever for Facebook. We have stated previously that we believe a social search engine with a full monetization model would be worth $7-$8 per share to Facebook."

The analyst rates Facebook shares "buy."

Graph Search will eventually be a business; don't let Zuckerberg's words fool you. It has been developed to generate significant revenue over time, and could make inroads into Google's dominant search business as it evolves and grows. When asked about the relationship with Microsoft (Bing powers the search function that Graph Search can't find), Mark was quick to note that the two companies have a great relationship. "We have a great partnership with Microsoft," he said. "We continue to work with Microsoft to make Bing better, and they're working with us to make Graph Search better."

This is a direct shot at Google, especially as Google continues to add Google+ results to users searches, to try and make it more social. Investors are also taking this as a shot against Yelp (YELP), which helps users find places to eat, shop, and more, based on recommendations and reviews. Yelp's stock traded lower on Facebook's news. Facebook's hoping that by giving you access to your friends' 'likes' and recommendations, search will become more social, and will give you more access to ideas and suggestions to make your offline life more fulfilling.

Just don't expect to see any revenue from this venture for a while.

-- Written by Chris Ciaccia in San Francisco

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