Facebook rolls out friends-based search product

MENLO PARK, California Wed Jan 16, 2013 4:09am IST

1 of 3. Facebook Chief Executive Mark Zuckerberg introduces a new feature called ''Graph Search'' during a media event at the company's headquarters in Menlo Park, California January 15, 2013.

Credit: Reuters/Robert Galbraith

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MENLO PARK, California (Reuters) - Facebook Inc(FB.O) took the wraps off a new search tool on Tuesday that lets people trawl their network of friends to find everything from restaurants to movie recommendations, an improvement that's likely to increase competition with review websites like Yelp and potentially even Google Inc.

The so-called graph search marks the company's biggest foray into online search to date, though it displays only information within the walls of the social network rather than links to sites available across the Internet.

Mark Zuckerberg, Facebook's 28-year-old founder and chief executive, introduced the new product at the company's first major product launch since a rocky initial public offering in May.

"Graph search is designed to take a precise query and return to you the answer, not links to other places where you might get the answer," Zuckerberg told reporters at its Menlo Park, California, headquarters. "What you've seen today is a really different product from anything else that's out there."

Facebook shares, which have climbed 15 percent since the start of the year, slid 3 percent Tuesday to just above $30. The product news fell short of some of the most optimistic predictions, which included speculation that the social network would introduce its own smartphone or an Internet search engine.

Dubbed "graph search" because Facebook refers to its growing content, data and membership as the "social graph," the function will be available at first only as a "beta," or trial, for just hundreds of thousands of its billion-plus users.

It will let users browse mainly photographs, people, places and members' interests. Zuckerberg stressed that people can sort through only content that has been shared with them, addressing potential privacy concerns.

Shares in Yelp dived more than 6 percent on fears that Facebook's new friends-based search concept will begin to draw users away from the popular reviews site, which also lets people maintain a circle of trusted friends. Google stock held steady.

Some analysts said Facebook may be taking a tiny step toward eventually challenging Google on its home turf, but said that was a much more challenging undertaking and a long-term possibility at best.

Zuckerberg stressed that the new graph search did not encompass Internet searches, Google's specialty.

Sterne Agee analyst Arvind Bhatia said the product was inevitable. "We think this will enable them to expand beyond display ads and ultimately compete with Google," he said.

THE PROMISE AND THE THREAT

The world's largest online social network, Facebook is moving to regain Wall Street's confidence after the IPO and concerns about its long-term financial prospects.

Zuckerberg said the company is working on making money from users who are migrating to mobile devices. He said he could foresee a business in search over time, but analysts advised caution. Facebook has come under fire numerous times for unclear privacy guidelines.

While Tuesday's revelation fell short of some of the wilder guesses about what Facebook planned to reveal in its highest-profile news briefing since its market debut, analysts said it was overdue for a well-rounded search tool, given its current inadequacies.

Zuckerberg promised that users will be able to tailor their searches, specifying music and restaurants that their friends like, for instance, or their favorite dentist. The reverse is also possible, such as discovering friends who have an interest in a particular topic.

"You need to be able to ask the query - like, who are my friends in San Francisco?" Zuckerberg said. "It's going to take years and years to index the whole map of the graph and everything we have out there. We'll start rolling it out very slowly. We're looking forward to getting it into more people's hands over coming weeks and months."

Wedbush Securities analyst Michael Pachter argued that recommendations from trusted friends were more valuable than from strangers on the Web.

Forrester analyst Nate Elliott was less sanguine. "Facebook's worst nightmare is a static social graph; if users aren't adding very many new friends or connections, then their personal network becomes less and less active over time," he said. "Terrifyingly for Facebook, that threat is very real: We haven't seen significant growth in the average number of friends per user recently."

(Additional reporting by Malathi Nayak in San Francisco and Himank Sharma in Bangalore, writing and editing by Edwin Chan; Editing by Phil Berlowitz and Prudence Crowther)

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