Facebook vs. Google: It's on in searchJanuary 15, 2013: 6:39 PM ET
Facebook's new "graph search" is the beginning of a long-term attempt to strike at Google's most lucrative product.
FORTUNE -- When Google unveiled free word processing and spreadsheet apps back in 2007, the company wasn't trying to immediately topple Microsoft's Office suite. After all, Google's apps were―and still are―inferior to powerful programs like Word and Excel. But their launch was the beginning of a long-term campaign to nibble away at one of Microsoft's core franchises. In fiscal 2012 Microsoft's business division, which includes Office, brought in $24 billion. But there is little doubt that it would be even larger had Google not offered a cheaper alternative now used by millions of businesses.
Facebook (FB) is taking a page from Google's (GOOG) playbook. The social networking giant on Tuesday unveiled a search service. It is not aimed at toppling Google from its perch as the king of Web search any time soon. Instead, it is the opening round in a long-term campaign to erode Google's monopoly over the most powerful and profitable business on the Internet. If successful, Facebook's so-called "graph search" will offer users an alternative to Google that may work better for many types of queries. In due time, it could turn into a tidy business for Facebook.
"Graph search is not Web search," Mark Zuckerberg, Facebook's co-founder and chief executive, said during a packed press conference at the company's headquarters in Menlo Park, Calif.
Indeed, Facebook only searches for things that have happened on its sprawling site. For now, it concentrates on four types of searches: people, photos, interests and places. But the types of queries possible with Facebook's new service are innovative and useful. Users can "find friends who like soccer" or "find friends who like soccer in your hometown." Users can find all the photos they've liked or all the photos their friends have taken in Paris. They can find restaurants in San Francisco liked by friends who are locals, or by friends who are Indian―say if they're in the mood for spicy food. Users can't do that on Google.
The promise of this kind of service—which, by the way, was built by a team of 50 engineers led by two ex-Googlers—is enormous. For starters, it could broaden the utility of Facebook, turning it from a tool of interaction into one that helps users discover new things. And Google, which is trying to be the place where people find not only other Web pages, but also restaurants or plumbers or HD televisions, should be worried. (Google declined to comment.)
Yet Facebook's caution―graph search is still in beta or test mode, and is only being rolled out to a very small fraction of the site's more than 1 billion users―is warranted. The company's demo was dazzling, but the queries were for users who were also Facebook employees. These are Facebook "super-users" who likely check in every place they go, and click the Like button on every book, song or brand they, well, like.
I'd venture a guess that the majority of Facebookers are more parsimonious in their usage of the site and may not regularly share what they're reading or listening to, let alone recommend their plumber, dentist or contractor to their closest 500 friends. Without that information, their contribution to the search graph will be limited. I have hundreds of Facebook friends, yet the answer to the query "pizza places in Oakland that my friends like" was hardly satisfying—it listed just one result. (Regular Facebook users can request access to graph search here.)
And of course, Google has never been known for taking its eye off the ball when it comes to search. The company already has a social network in Google+. While it lacks the level of activity that Facebook enjoys, it could readily serve as the basis for Google to build a rival graph search service. (As Fortune chronicled in its 2011 cover story, this battle has been a long time coming.)
The biggest understatement of the press conference may well have been Zuckerberg's response to the question of monetization. "This could potentially be a business over time," he said. For now, graph search has no ads. But if people start searching for restaurants of stores in large numbers, plenty of those businesses will be willing to pay Facebook in exchange for preferential placement in search results. Zuckerberg said Facebook would focus on improving the product, and rolling it out on mobile phones and in other languages, before it considers taking ads.
"This is one of the coolest things that I think we have done in a while," Zuckerberg said. Many Facebook analysts agree. If Facebook appeared beleaguered after its disastrous IPO, Zuck's crew is gunning for Google again, reminding its biggest rival that while it was down for while it certainly wasn't out.
Oh, and as the two giants battle it out in the coming years, there is bound to be collateral damage. On Tuesday, shares of Yelp (YELP), which risks being tripped up by Facebook's graph search sooner than Google will, dropped more than 6%.