Facebook is running out of ad space on its news feed. Is search its next big money spinner?
Facebook’s earnings for quarter two crushed Wall Street estimates, with ad revenue for the most recent three months of the year clocking in at a cool $6.24bn. Mobile ad revenue counted for 85 per cent of this figure – up 81 per cent year-on-year – indicating strong growth for the world’s biggest social network.
Facebook is running out of ad space on its news feed. Is search its next big money spinner? / Facebook Messenger
In short, Facebook must be doing something right. However, far from comfortably enjoying his company’s command over digital advertising, chief executive Mark Zuckerberg was keen to outline the tech behemoth’s next major play, search.
Speaking to investors during the earnings call yesterday (28 July), the chief said that the tech behemoth is in the “second stage” of developing its long-term search strategy, which in Facebook terms means that it’s improving its search function so that users can originally interact with it before taking the next step – handing it over to businesses.
Facebook tightened up its search function last year, unveiling its Search FYI feature, which allowed users to find out about global topics in a Twitter-esque way with better suggestions and search results on public posts.
Since that refocus, it’s now seeing two billion searches per day across the 2.5 trillion posts uploaded to the site, compared with 1.5 billion searches in July 2015 – a 33 per cent climb in just nine months.
It’s no wonder then, that search is high on the agenda for Zuckerberg and co. Facebook is clearly looking to move away from being so dependent on its news feed-centric advertising model – something Zuckerberg hinted at during the call when he was quizzed on the future of Facebook search, saying the company had already built a “consumer case” for it.
“So when we talk about our strategy, I often talk about how when we develop new products we think about it in three phases. First, building a consumer use case. Then, second, making it so that people can organically interact with businesses,” he noted, adding: “And then third, on top of that, once there’s a large volume of people interacting with businesses, giving businesses tools to reach more people…and that’s ultimately the business opportunity.
“So I’d say we’re around the second phase of that in search now. We have a pretty big navigational use case where people look up people and pages and groups that they want to get to, and look at, and search. One of the big growing use cases that we’re investing a lot in is looking up the content in the ecosystem and that is an area that we’re very excited about, which helps people find more content.”
However, Joe Hopper, senior social strategist at Rapp, isn't so sure Facebook's search offering is as far ahead as Zuckerberg claimed. I actually don’t buy that Facebook are in the “second phase” of search development," he continued. "It’s understood that Graph Search was a failure because its semantic algorithm served some embarrassing results but it was also difficult to use. But I’m of the belief that Facebook still have to build a consumer use case for their search proposition."
Facebook’s advantage in monetising search lies in the research and recommendation stage, where reviews, recommendations and visit data can be leveraged to deliver more personalised results to the user, with the potential of intercepting the intent-based search before they go to Google.
The Messenger Bot programme shows how they might potentially roll this out, opined Kieran bass, strategy director at digital agency Roast. However, the "question remains around the intent of the search which ultimately determines how much businesses are willing to bid on the ads and ultimately, the financial viability of the product," he added.
Facebook's DeepText artificial intelligence could go some way to solving this issue. Launched last month, the tool is analysing text continuously so that the social network can offer services and content that match up with what people are sharing or might need.
The idea that Facebook wants to become a place that surfaces public content for its users is something that Twitter in particular should be very worried about. Twitter has long been the go-to forum for social commentary around live events; something it was keen to make a song and dance about in its new advertising push, and Facebook’s renewed focus on making more intuitive could significantly impact on Twitter’s USP.
When it comes to Google, there’s no doubt that Facebook users’ sharp surge in search could build the case for it to start offering up paid search ads to brands and publishers if interest is high enough, with Zuckerberg saying “there's a reasonable amount of behavior in there which is looking for things that, over time, could be monetizable or commercial intent”.
He continued: “And at some point we will probably want to work on that, but we're still in the phase of just making it easier for people to find all the content they want and connect with businesses organically.”
Search on Facebook might be growing fast but for it to be a key trend for advertisers (and a scary one for Google) then the search queries themselves have to show more commercial intent, explained Dan Fallon, managing director at Search-Star.
"It’s this intent, after all, that has always been a crucial aspect of the success of AdWords," he continued. "The current search activity on Facebook reflects the content available on the site: people, photos, reactions to news etc. Unless the content of Facebook becomes explicitly commercial, the search is unlikely to follow. Ads served against non-commercial search are never going to match the relevance of those served against a product or service specific query on Google, and are of correspondingly less value."
Bass built on this point: "In order to do this, Facebook will have to change the behaviour of its user base, encouraging them to search in more depth and detail in what is at the moment, a site with poor search functionality without detracting the audience’s original intent – communication."
Rapp's Hopper meanwhile believes that Facebook's search offering has been "pretty poor for a long time," adding that this isn't the first time Zuckerberg has expressed an interest in "getting it right."
Within the wider industry, it's understood that Graph Search was a failure because its semantic algorithm served some embarrassing results but it was also difficult to use.
Since then, Hopper pointed out, Facebook's boss has moved his sights elsewhere, "particularly on connecting people to a real-time experience of their friends and relevant (or wealthy) brands," he asserted. "Frankly, the most recent quarterly financial report suggests they’ve been right to do so."
“Facebook’s move into commercial search was the next logical step given the social giant’s need to maintain uncluttered user experience on the newsfeed whilst still upping it’s commercial offering for businesses looking for performance based results," said Mark Jackson, managing director at MC&C.
"The way Facebook has introduced advertising into the newsfeed over the years has been intelligent and ahead of its time, especially on mobile, allowing for a strong targeted approach by leveraging the vast user data it has and this is the way it needs to introduce SEM onto its platform. There are big differences between search and display, primarily that the user is ‘coming to you’, and in the same way that display ads are relevant and don’t detract from UX, Facebook needs to ensure that users searching for social content aren’t bombarded by brands. Facebook’s users, as they claim, already organically interact with businesses, but it’s a big leap to monetising that in search, though if Facebook is smart about designing for the search need state then brands are likely to see greater performance, as the ads they serve will be more impactful and less abrasive, ensuring a lean and efficient footprint.”