Facebook’s reported move into search may one day prove a mortal threat to Google’s advertising business. But in the short run, the social network’s new project comes at an opportune time for the search giant.
For Google (NSDQ: GOOG), the impending arrival of Facebook Search presents a much-needed opportunity to beat back the legions of antitrust authorities circling all around it.
Recall that regulators appeared at the end of their ropes when Google announced “Search Plus Your World” and related privacy changes in January. The FTC Chairman soon after described the changes as a “binary and somewhat brutal” choice that forced consumers to give the company yet more of their personal information.
On a legal level, the privacy changes also fueled critics’ complaints that Google was violating Section 2 of the Sherman Act by abusing dominant market power. The company is the subject of multiple investigations in the US and Europe.
The arrival of Facebook could help Google say it is not dominant after all. Google, which controls 60-70 percent of the search market, has long tried to refute antirust charges by saying competition is “just a click away.”
Google may need this argument more than ever now that it has jettisoned purely objective search results in favor of promoting more social forms of search. In the past, Google has argued that objective results proved it wasn’t abusing its market power—this argument no longer holds water in light of the recent search changes.
The arrival of Facebook in search could provide Google with a regulatory reprieve but, in the long run, it could also spell trouble. Google makes nearly all its money from advertising and it stands to lose out if Facebook can capitalize on a market for ads based on friend recommendations. Facebook’s own executives have in the past said that such ads are worth three times as much as ordinary ads.
BusinessWeek reported last week that Facebook had hired a former Google engineer to develop search based advertising.
A Google spokesperson declined to comment for this article.