With Graph Search, Can Facebook Kill LinkedIn, Yelp–Even Google?

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Facebook CEO Mark Zuckerberg introduces Graph Search (Photo: Robert Hof)

From my Forbes.com blog The New Persuaders:

Facebook took pains today to tell the world that its new social search serviceGraph Search, is only a very limited tool that it will roll out very slowly over a period of months and years.

But CEO Mark Zuckerberg and his search staff couldn’t help but reveal their enthusiasm for the vast possibilities. For all their professed modesty, what struck me at the company’s press event introducing the service was how specific and broad-ranging Zuckerberg and his Graph Search leaders were about what it could provide: just about everything, potentially, that every company from LinkedIn to Yelp to Foursquare to Match.com to … yes, even Google provides today.

That’s an exaggeration, of course, that even Facebook folks surely didn’t intend. All of those companies have distinct, well-developed services with extensive user bases that are unlikely to shrivel up no matter how good Graph Search turns out to be. In most cases, they will probably retain a durable advantage for years to come. And as Zuckerberg said, it’s very, very early for Facebook search, and search is a devilishly complex discipline to do well.

Still, to hear it from Facebook itself, Graph Search will offers ways to provide similar services, sometimes in potentially easier and more effective ways:

* Recruiting: One of the first examples Facebook provided today was that Graph Search could help in finding qualified candidates for jobs. For instance, Lars Rasmussen, the Facebook director of engineering who heads the Graph Search team, mentioned that he could find people from NASA Ames Research Center who are friends of Facebook employees.

As investors, who bid up LinkedIn’s share a fraction today, no doubt recognize, that company has a pretty good if not exclusive hold on recruiters. And given that finding friends who worked somewhere is a rather specific subset of qualified candidates for a position, there’s not much chance recruiters will abandon LinkedIn for Facebook anytime soon. But Facebook, already used in various ways by recruiters, could siphon off activities that might otherwise have gone to LinkedIn. … Read more at The New Persuaders. But to conclude …

So, to answer the question in the headline: No, Facebook won’t kill any of these companies, certainly not anytime soon. They’re too strong, Facebook has too much still to build and then to prove, and rarely does a company kill another healthy company no matter how good its products are.

Investors may be thinking as much, as they sold Facebook shares to the tune of a 2.7% drop in price today. But if anyone doubted Facebook’s ability to keep disrupting the status quo, they surely shouldn’t doubt it anymore. Even with its baby steps into the search business, Facebook has again set new terms of engagement in the battle for the soul, or at least the cash register, of the Internet.

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Why Investors Love Yelp Even As They Hate Other Social Stocks

Image representing Yelp as depicted in CrunchBase

Image via CrunchBase

From my Forbes.com blog The New Persuaders:

Unlike those other two little social media companies whose disappointing second-quarter reports last week knocked their shares to all-time lows, Yelp today wowed investors with better-than-expected second-quarter earnings and outlook for the rest of the year. After falling almost 6% today to $18.82, shares in the local business reviews site have rocketed up in after-hours trading by 14%.

Needless to say, a good quarter and outlook both help, but there’s more behind investors’ enthusiasm about Yelp versus Facebook and Zynga. They perceive some key positive fundamentals, too:

* Reviews of local businesses present a clear, understandable opportunity for advertising, and local advertising is a nut that no one online has yet cracked the way the Yellow Pages did in phone books. Yelp’s reviews provide a prime place for this advertising to appear. Local advertising rose 89% in the quarter. Meantime, fairly or not, both investors and advertisers still aren’t sure about Facebook’s and Zynga’s business models.

* Yelp has network effects in its favor, since the more reviews it gets (up 54% from a year ago, to 30 million), the more businesses are likely to create Yelp pages and advertise, in a self-reinforcing cycle. Active local business accounts rose 113% from a year ago, to 32,000. …

Read the complete post at The New Persuaders.

Google + Yelp: The Annotated World Is Coming

When Google says it wants to organize all the world’s information, people often assume the “world” really refers mostly to the Web, and maybe books. But if the search giant can be criticized at times for wild ambition, it means what it says about the “world” part.

With the possible acquisition of local business review site Yelp, being reported by TechCrunch and the New York Times today, Google would take another of many recent steps toward making real-world locations essentially searchable. The notion of an annotated world, one in which location technologies, the Web, mobile devices, and ubiquitous sensors create and reveal information about real places, is one I heard years ago from Esther Dyson. Jeff Jarvis brings up the potential that Google could make such an augmented reality, as it’s now called, an actual reality on a wider scale:

Thus Google becomes a doorway to the annotated world. Everyplace has information swirling around it; Google organizes it and motivates and enables us to create more information for it to organize.

And, not least, Google could offer local ads against all that information, which often isn’t on the Web because local businesses often don’t have a Web site. In other words, Yellow Pages 2.0 (but with blue, red, and green too).

Now, whether Google will indeed be the central organizing force here is far from certain. As Om Malik and others point out, Google + Yelp could get shoved aside by Twitter + Foursquare (the location-based social network). If such a mashup works, the immediate feedback on local businesses could be powerful for people and for advertisers.

That won’t happen right away, if ever. But if there’s even a small possibility of such hybrids or alternatives emerging, I have to wonder whether the reported $500 million price tag for Yelp might be a bit much even for Google. Not to mention, Google should be leery of allegations of pay-to-play reviews and intimidation on Yelp, even if Yelp has denied them, because a backlash against Google’s power is already well underway.

But if Google has struggled at anything, it’s at building viable communities, and Yelp is certainly one. With $22 billion in cash and a demonstrated willingness to spend a lot to buy community-oriented sites (like YouTube for $1.65 billion), Google will surprise no one if it closes the deal anyway.

UPDATE: Now it appears the deal is off, according to TechCrunch. It’s not clear what happened. Did Yelp decide it could do better than a $550 million reported deal, or go public instead? Or did Google decide that price was too high, coupled with the uncertainties? Google at times has shown surprising restraint in assessing acquisitions, seeming to pass when the price goes too high. But I wonder if another factor is that it has been wary (YouTube aside) of moving too far into hosting its own content, which is what it would be doing with Yelp. Whether that proves to be admirable or short-sighted isn’t yet clear.

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