Note to Facebook (Nasdaq:FB): If you're going to do it Apple (Nasdaq:AAPL) style and hype up a press event at your headquarters, make sure you are unveiling something really, really cool - or to borrow a cliche, "game changing".
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Think for a moment about those cryptic press invitations Apple sent out for product announcements. The tech rumor mill would be abuzz about what the company would soon announce. The big day came. Steve Jobs would walk out looking all "Steve Jobs" and announce the iPad. Or the iPod. The iAnything. That was cool. It was big, and there was little doubt that it would change the tech landscape.
Underwhelming Compared to Apple's Announcements
Compare that to Facebook. The company invited the press to its headquarters for an announcement on Jan. 15. Nobody, not even the best of the tech rumor mills, had an idea of what the announcement was all about. So far, so good. Secrecy builds tension, and tension fuels buyers of the stock.
Then, as everybody sits and waits - the air filled with cautious anticipation - out comes Mark Zuckerberg onto the stage. Whatever you think of Mark Zuckerberg, let's agree that he does not exactly have the cool factor going for him the way Jobs did.
At least there's going to be an announcement. Can't wait for the announcement.
The announcement? Facebook graph search.
What's graph search? What's a graph? These questions led investors to sell the news to the tune of 2.75%.
Once you get beyond the epic letdown of the announcement, there may be more there than meets the eye. Want proof? Take a look at Yelp (NYSE:YELP). Shares were down more than 8% that day with much of the drop coming after Facebook's announcement.
SEE: A History Of Apple Stock Increases
What Is It?
Graph search, according to Cnet, is a "tool for using natural language to find information hiding in plain sight." Basically, if you are an avid social networker, you have amassed a lot of stuff - pictures, videos, new friends, old friends and a ton of memories. Until now, finding that information on Facebook wasn't easy. As time passes, the information is buried even deeper. Graph search will unearth the buried information.
Because graph search allows you to search in any way you want, you could use it to find people who live near you or even find your local friends' favorite Italian restaurant or what they think of a new movie. (That is one of the reasons Yelp is concerned.) The possibilities, according to Cnet, are extensive.
Those who have used it say that there's a steep learning curve, and that could make early versions of graph search slow to catch on. According to some Wall Street analysts, however, this could be the beginning of a run to challenge Google (Nasdaq:GOOG) on its home turf.
For now, graph search only searches within the walls of Facebook, and only content that was shared with the user. But some believe this is the beginning of a new path for the social media giant. What if graph search was unleashed on the entire Internet?
Wall Street has sounded the alarm. Facebook, unable to monetize the growing trend in mobile, is under pressure to find the next tool for engagement. As users find most of their "friends," their level of Facebook engagement drops and traffic slows.
SEE: 3 Things That Can Make Or Break Facebook
Facebook has relied on a growing user base to keep engagement rates high. But with the rate of new users slowing, investors want to see a new monetization strategy.
Search is already a proven business model making investors optimistic that Facebook has found a new path to revenue. With the announcement less than a week old, investors and analysts still have much to digest.
What is a graph, you ask? Graph is Silicon Valley social media lingo for the content and membership of a social media site. Each individual, and the data he or she creates, is a graph. Make sense now? You still might be thinking that Facebook could have come up with a cooler name. You are right!
The Bottom Line
This time next year, we all might feel a little shortsighted for not seeing the potential in graph search right away. In the meantime, Facebook, next time you announce a product, Apple-style, could you make it a little more epic? If Apple would have pulled everybody together to announce a new graphics chip (or the IPhone 4s), it might have received a similar response.
At the time of writing, Tim Parker did not own shares in any company mentioned in this article.
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