As the seventh-largest publicly traded company in the United States, and one trading at a lofty valuation no less, investors would do well to question just how much future growth shares of Facebook (NASDAQ:FB) can offer at their current levels.
Such questions have led to Facebook searching for innovative solutions to its perceived financial ceiling, as evidenced by its Internet.org initiative and more. However, Facebook has long been seen as a potential challenger to Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google search engine dominance, and a recent move from Facebook again points to the social network's long-term ambition within search.
Facebook improves search
Although it isn't immediately clear when Facebook began developing its own search capabilities in earnest, the social media site's initial public search product -- Search Graph -- left plenty to be desired. Publicly launched in March 2013, Facebook largely shuttered the product at the end of last year amid criticism of its complexity. However, with a recent move, Facebook is again attempting to wade deeper into one of the most important (and lucrative) areas in tech.
Late last month, Facebook publicly unveiled a new set of capabilities built into its much-used search bar that enable users to comb through the social network's massive array of posts and commentary from friends, random users, and third-party publishers. In one high-profile experiment, Facebook prompted users to search for Misty Copeland when the acclaimed dancer was named the first African-American principal ballerina at the American Ballet Theatre, a prompt I found confusing at the time, but makes plenty of sense in light of this more recent context.
According to the company, Facebook receives more than 1.5 billion requests for information of all types daily, giving the social network a unique window into our collective consciousness, an advantage the company has long seen as the bedrock for a robust potential search engine. According to the company, it has already indexed more than 2 trillion posts. And as clearly as this narrative charts Facebook's long-term arch eventually clashing with Alphabet's, this news clearly holds implications for other technology companies as well.
Alphabet and Twitter in Facebook's crosshairs
For investors, Facebook's gradual machinations toward search demonstrate its potential as both a news source and a more general source of information, both of which could directly impact the financial performance of Twitter (NYSE:TWTR) and Alphabet.
Looking at Twitter, Facebook has been positioning itself as a go-to source for news for some time now, a move that fits perfectly with expanding the company's advertising opportunities. It all comes down to finding new ways to increase the amount of time that users spend on Facebook's expanding platform.
In one high-profile example, Facebook recently debuted its Instant Articles publishing platform, which has already been enthusiastically adopted by publishing giants like The Washington Post. Now, enabling its users to search for real-time commentary through its new search capabilities, Facebook is also positioning itself as a key source of the kind of real-time news in which Twitter alone so perfectly specializes. It isn't immediately clear whether or how this move might impact Twitter, but given Facebook's massive size advantage, this is clearly a looming risk Twitter investors will want to monitor in coming months.
Turning to Alphabet, many have long argued that Facebook will eventually attempt some form of full-fledged challenger to Alphabet's core Google search product, a fact that Facebook CEO Mark Zuckerberg has repeatedly alluded to in the past. On Facebook's FY 2013 Q4 earnings conference call, Zuckerberg discussed at length his long-term vision of Facebook's search efforts, an effort he characterized as a decade-long project because of its technical complexity. So far, it appears we've only seen the early iterations of Facebook's search efforts. Initiatives like Search Graph, Facebook's voice-powered digital assistant named M, and the recent updates to its search bar that led to this article all fall well short of representing meaningful challenges to Alphabet's Google in the short term.
However, and I'd argue more importantly, these repeated public efforts, when viewed together, send a clear signal about Facebook's longer-term ambitions. Although it has diversified into other areas of digital marketing, the immense profits and consumer insights search yields help buoy Alphabet's sprawling ambitions. With its increasing dominance of mobile software, few companies can credibly compete with Google in multibillion-dollar markets like search, but Facebook is clearly one of the few exceptions.
So, while Facebook's recent search efforts remain years away from any meaningful threat to Alphabet, it remains an important storyline for Alphabet investors nonetheless.