Facebook vs. Google: the epic battle

The Facebook initial public offering (IPO) will embolden the social network to up its fight with Google for the online advertising market. But don't expect Google to back down.

Mark Zuckerberg at the F8 developer's conference in 2011.
(Credit: James Martin/CNET)

How is Facebook ever going to justify the US$100 billion valuation that the public market is about to put on it? By making lots of money, of course. And where is it going to get that money? It's going to steal it from Google.

At least, it will try. While Facebook is a social network and Google is a search engine, both companies make money from advertising, and they're both battling for the same advertising dollars, for mindshare of the same users to view the ads and ultimately for ownership and control of the same raw ore that determines whether network companies work: information.

Facebook and Google represent different epochs in technology; Facebook is the present day, the social era, while Google is the rapidly receding past, the era of the web. In most major technology shifts, the leaders of one era do not lead the next. They may survive as valuable companies (Microsoft — leader of the PC era), but they don't drive people to the next big thing.

By that argument, Google is toast. It's the next Microsoft. It's valuable, in a here's-your-gold-watch kind of way, but it's not important to the future. Leave that to the new kids, with their energy and new ideas.

Except that knocking Google off its perch won't be so easy, historical parallels notwithstanding. Google is not stagnant. Its core business is still growing, and its leadership has been smart enough to see the Facebook freight train coming and actually do things about it. Google has launched major new social initiatives while improving its core products. It's also ruthlessly killed non-performing inventions. It has moved successfully into a completely new market (mobile operating systems), in a manoeuvre reminiscent of Apple's expansion from computers to music players and phones.

Google is going down swinging. Maybe it's not going down at all. Below, we've outlined five arenas where Facebook and Google are battling for the future of technology, and how they stack up.

Search

The web is the greatest mine of information the world has known, and Google has done the best job of figuring out how to extract what's stored on it. Google's trick is not just collecting its own copy of the web, but how it picks pieces of information to give to users, and how it ranks the results: the PageRank algorithm. But PageRank has its limits.

Facebook knows who is connected to whom. That's its core value. That social data can be used to build a more socially aware search, and Facebook is doing just that in partnership with Microsoft and Bing.

Google is working on keeping its search ahead of Facebook in both social and traditional areas. Its "Search Plus Your World" feature integrates social signals into search. Google doesn't have the depth of social data that Facebook does, but this product does show that the search company can incorporate highly personal social data into search. At the same time, Google continues to push hard on improving plain old keyword search.

Google is getting into social search. Facebook is getting its social network into general search. The companies are beginning to collide in this core business. Google has the upper hand. But for how long?

Social activity

As we've written before, Facebook completely nails it in sucking users into its services. The average US user spends seven hours and 45 minutes on Facebook per month. Google overall is under two hours per month. That's a lot of engagement, and a lot of time that can be used to generate ad views and revenue.

Google, to its credit, does clearly understand the value of social interactions. Google+ is, in many ways, a better-designed social system than Facebook itself. Especially in the way that it handles variable privacy through its Circles concept. But it does not have the global connected user base of Facebook, and it's not clear that Google will be able to wrest users' main social attentions away from the site where their friends are already active.

Google probably cannot unseat Facebook as the driver of the social web. But Google can chip away at Facebook's users, and the social network is not invulnerable.

Identity

To own the social index, running a website like Facebook or Google is just a piece of the solution. Both companies have identity solutions. Facebook Connect is the more popular solution. It lets users quickly authorise an account using their Facebook log-in. It's also being used quite a lot for mobile log-ins.

The value to Facebook is enormous. Facebook collects data on what systems users are signing up for, which of their friends are also signing up for them and how everyone connects.

Google also has identity solutions, but most of the time, for users, logging in with Facebook makes more sense. Facebook is where users go to interact and be themselves. Facebook is becoming the standard for signing in to new services. Google needs to step up its game here.

Advertising

Search, identity and social are the raw materials that form the money-making alloy of advertising. Google is a US$40 billion company built on innovation and execution in advertising. That business isn't going away soon.

As Facebook extends its reach and its advertising programs, and through Bing continues to pound on the search business, it could make a dent in Google's dominance in the market, or at least give it some margin pressure.

Not that it will be easy. Google has demonstrated that the way people use search compared to how they use social sites makes a substantial difference in how advertising on those sites works. When users perform Google searches, they are looking for information. Advertising, at its best, is seen as just more information. Advertising on Google works for that precise reason.

On Facebook, the intent of users is rarely to find a product to buy or a plane to book. Facebook is used to find friends to talk with or brag to. This social intent does not reinforce advertising to the same extent.

Still, Facebook can be very effective for building brands, and it's a good platform for running social campaigns. GM's recent defection from Facebook advertising doesn't show that there's something fundamentally wrong with Facebook; rather, it shows that Facebook's ad sales reps didn't manage their clients' expectations well. That's a fixable problem. "Facebook can be used well for awareness and brand building," said Search Engine Land editor-in-chief Danny Sullivan. "People look at these two sites at different points of the purchase cycle."

Google's business also works because it has advertising products that any site owner can use. The entire internet feeds Google's main business model. Facebook doesn't offer external advertising yet. It may soon; it should.

Mobile

Users are getting off their computers and off traditional websites, and interacting more on the go, using their smartphones and tablets. Facebook of course has mobile apps, and mobile aspirations, including, perhaps, building its own hardware. But it's clear that Facebook is not a native of the mobile era.

Whereas Google has either the most or the second-most powerful mobile operating system there is, and, through it, control of many users' mobile experiences. Google also, finally, has begun making apps that seem native to the small screen. The new Google+ app for iOS is a beautiful app. It's a more integrated and thought-through experience than what Facebook offers.

Neither company has figured out how to make advertising work on mobiles, though, and that is the next big battleground. But until then, the companies are both smart to do whatever they can to encourage users to stick with their small-screen experiences. And the more mobile power they can hold on to, the less they'll end up under the thumb of Apple — the real leader in mobile innovation.

Upshot: advertising is everything

Facebook has to solve its problem with advertising, and most likely will do so by emulating and competing with Google. As a public company, Facebook will be driven by its investors to get this area sorted out.

Facebook's ownership of the social graph, and its success in identity services, is what it has to keep Google at bay. Google, meanwhile, needs to be sure that Google tools are what people continue to use to find things, do things and run their mobile experiences.

The infusion of IPO money will embolden Facebook to take on Google directly in areas where it's clearly weaker — primarily advertising, but also search and mobile. Google will defend its turf while simultaneously attacking Facebook in social (and hopefully in identity services). From completely different starting points, the two companies will meet head-on for users, mindshare and money.

Via CNET



Add Your Comment 3


Post comment as
 

aznfratboy posted a comment   
Australia

Facebook's future revenue won't come from advertising revenue, it will come from the information and who they sell it to.

If Zuckerberg really wants to go rogue, it could sell the information it has attained on tis billion user database to the highest bidder. That's there its going to made its money. So effectively, all the information will be sold to the American government (if the US doesn't hack Facebook and steal all the info first)

 

ras0406 posted a comment   
Australia

Another point is this: how good is Facebook at converting adertising and PR dollars of companies into sales? The GM decision could be more significant than it might seem at first. GM's main reason for discontinuing was the lack of evidence that Facebook advertising was increasing sales, which is what corporations are ultimately trying to do. Until social networking can fix this, it's just the dotcom bubble happening all over again.

Some more food for thought: https://www.google.com.au/search?q=social networking is the dot come bubble all over again&sourceid=ie7&rls=com.microsoft:en-au:IE-Address&ie=&oe=&redir_esc=&ei=nOS1T-CIOKWviQeAwtX-CA#hl=en&rls=com.microsoft:en-au%3AIE-Address&sclient=psy-ab&q=social networking valuation bubble&oq=social networking valuation bubble&aq=f&aqi=q-A1&aql=&gs_l=serp.3..33i29.9123.10144.1.11220.10.9.0.0.0.6.286.1785.2-8.8.0...0.0.bLKPKrJOIX4&pbx=1&bav=on.2,or.r_gc.r_pw.r_cp.r_qf.,cf.osb&fp=139d546bb80ab4ad&biw=1047&bih=348

 

rkc_62 posted a comment   
Australia

Wow - judge, jury and executioner.
How many users @ 7 hours per month compared to how many users @ 2 hours per month? Facebook is practically banned in most workplaces, but an essential tool in most business as well as homes.
And you completely missed mail. The ability to mine gmail accounts for user data is invaluable - the data gathered there is far more valuable to advertisers than knowing which tween insulted their bff at the mall today.
Facebook is nothing more than a very well executed and more integrated MySpace ver 2 - it will probably succeed long term, but it could just as easily follow MySpace into irrelevance as something new comes along.




Sponsored Links

Recently Viewed Products