Facebook versus Google

Is this the fight of the century or just a Facebook dream? No doubt just to be named as a contender against Google is any company’s dream, but in this situation, I’d call it a Facebook fantasy.

  Facebook seems to think all you need are millions (or a billion) subscribers and you can generate limitless revenue from ads… or now search.  That’s right, Facebook is getting in to the search business with their new Graph Search.  Watch out Google!

The problem is that Facebook seems intent on living outside of reality, Facebook vs Google not learning from recent history, and ultimately creating their own little version of the .com bubble of the late 90’s.  Remember those days when the mantra was “Go for market share and figure out how to make a profit later!”?   Billions of dollars were wasted in stupid ideas.  Anyone who tried to speak up against the lunacy was shouted down and accused being “old school”, of not understanding the power of the Internet.  It was a new day for new business rules.  But in the end the only rule that matters in the capitalist society in which we live (present administration excepted) is the P&L.  And most of those .com’s only had “L” and never any prospect for “P”.

The VC vultures knew that dirty little secret, yet they continued to pump money into the craziest of notions with the thought that all they had to do was get the company public, get ten times the dollars of their initial investment out and let the everyday investors (also known as saps) find out that it really was a stupid idea… as they slowly ride the stock into the ground. (Or not so slowly in some cases.)

And now, just when we thought sanity had prevailed and people understood that the Internet is just technology and doesn’t change the basic need to make revenue exceed costs, here comes the Facebook IPO.  It dominated the business news like the ludicrous sock puppet of Pets.com in ’99 and 2000.  The hype was deafening.  Facebook was claiming almost a billion users.  How could you not make tons of revenue with a billion users?  But yet again, no one seemed to be asking the difficult questions about long term plans for profitability.  It would be rude to speak of such things at the FB party.

Finally the IPO day came and the stock debuted at $38 / share.  Immediately reality hit; within a month the stock was at $26, in four months it was at $18 – less than half of it’s opening price.  To this day the stock has never exceeded the opening IPO price, even on opening day.  That’s pretty much a disaster any way you look at it.  But in the end it was the same joke all over again with the Wall Street gangs taking their multi-million dollar fees winning regardless, and as before investors have ended up riding another over-hyped Internet stock slowly into the ground.

In all fairness I should report that FB has rebounded somewhat, trading around $28 now, but that’s still 75% of the opening price, the price people couldn’t wait to get in on.

It’s not a year later and Facebook is trying something new. Search.

Admittedly I’m not much of a Facebook user but when I do log on the odds of me using it to search for something I’m going to spend money on is slim to none.  On Facebook I’m looking at or for people that are connected with me.  But when I google something, most times it is a subject matter or it is directly with the intent of buying something.  Regardless of what Facebook does with their new search tool, people aren’t going to go to Facebook as a first stop for online shopping, and that is the key that allows Google to drive revenue through ad words.

Clearly Google makes missteps. Just look at their dismal record trying to get into Facebook’s turf with Orkut, Google Buzz, and now Google+.  (I suppose next we’ll see the object orient version, Google++).  But search is Google’s turf.  And search is where you go to do something useful.  I’ve never heard anyone say “I’m not using Google anymore” but I have heard that many times about Facebook.  It’s a social phenomenon that may have hit it’s peak already.

The real question is, will Internet search become commoditized?  Is there magic in Google or were they just a pioneer that will ultimately face real competition?  If so, it won’t be Facebook, at least in the near term… but will Bing make a splash?

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