Facebook And Google Should Engage In Coopetition
Despite many tech pundits obsessing over Facebook or Bing creating a better search product than Google merely due to likes, I’ve stood my ground that this is simply not an accurate observation. With nearly all the major tech publications publishing stories pitting Google vs. Facebook, it’s an easy, but at this stage huge assumption to make and not backed by anything but opinion.
So it was great to see Wired come to the same conclusion:
Some tech pundits foresee a Facebook future where friend recommendations replace search, or Facebook gets enough data from what users like to make a more relevant search engine. That’s unlikely, for a number of reasons, including that Facebook profiles aren’t that detailed and that Google is already building social into search (look here if you are logged into a Google account to see a glimpse of what’s going on).
The Wired story goes on to share a more likely scenario of how Facebook could become a serious competitor to Google (and other display networks):
Instead, follow the money Facebook is making now. Depending on how much you have filled out your Facebook profile, you might have noticed that Facebook ads are sometimes eerily too good, as if Eminen’s music label actually knows what kind of music you like.
…But it’s a near inevitability Facebook takes the same, logical step Google took and starts putting ads on third-party sites, targeting Facebook users reading the Washington Post, The Daily Beast, or your hometown newspaper.
Those ads could be splashy and dominant – the way advertisers like them these days, without distracting from the Facebook experience. They can also be very targeted, without Facebook having to hand over the info about that reader to the website.
It has the potential to be the opposite of Google’s Adwords/Adsense division, with huge profits coming from outside the Facebook walls. Facebook could then grab a giant and dominating slice of an evergrowing online display ad market, while simultaneously making display ads actually targeted.
For those who think the story was TL;DR, in essence Facebook could pose a threat to Google’s content network (not search) and try to offer a better product from a targeting standpoint.
The value of this targeting is yet to be seen, and anyone involved in online advertising can tell you that, overall, search ads (which are demand-based) perform much better than display/content ads.
I don’t think funds are going to shift away from Google’s cash cow of search ads, but the opportunity is wide open to continue to funnel revenue from offline ads onto the web, and that market is far larger than simply trying to take revenue from the existing online advertising market.
Anyway, the Wired story seems like a very real future, especially when put into context with a quote from Zuckerberg at the D8 conference:
The world is changing so quickly now that I think the biggest competitor for us is someone we haven’t heard of. So we just need to stay focused on doing what we do and doing it well.
Facebook’s core revenue driver is advertising, and they’re already achieving an estimated $1.3 billion a year and rising via ads within the network. Going offsite would be a logical next step.
It’s also interesting that Zuckerberg notes their biggest competitor is likely someone they haven’t heard of. This makes sense, because if a product that is radically different catches on it could shift user behavior away from one which supports a Facebook-centric web.
Google definitely knows this too, but they are at an advantage: search is a core function of the web and is not going away anytime soon. Google’s relentless focus on doing what they do well is why they continue to have a better search product than anyone else. And the user intent behind search is far too valuable to decrease the continued revenue behind search advertising.
Conclusion: coopetition would be so much smarter
Online advertising is growing organically – but pouring fuel on that fire could accelerate this trend.
Whether Facebook puts a dent in Google’s content network ads is yet to be seen, but why would they go after that when companies spend absurd amounts of money on things like TV and newspaper ads that aren’t even track-able (at least, not at the level of web ads)?
If Facebook aggressively pursues offsite advertising the potential from loyal Google-advertisers already getting results from that system is tiny compared to the wide-open market of those advertising offline.
Competition between Facebook and Google seems silly to me. They would both get bloody in that battle if the focus was hurting each other instead of increasing the market potential. Zuckerberg even says Facebook’s largest competitor is one they haven’t heard of.
So why fight when they have the same opportunity? Facebook and Google should engage in coopetition and work independently to position traditional advertising as irrelevant. Doing that would create more revenue for everyone, as Facebook and Google are the natural places companies would look to shift budgets.