Predicting the future is not an easy thing. In fact, it is impossible to have precise forecasts about things and events that are going to happen in a given industry. In spite of this universal wisdom, there are certain topics and issues that are worth to talk, speculate about. One of these burning issues is the battle between Google and Facebook. The cold war between the two giants has recently turned into a ‘hot war’ triggered by the rumors of Facebook’s disgraceful act of trying to create a general scandal about Google’s practice of information gathering and usage without the consent of its customers.

As we all know the two giants have earned their revenues in completely different fields, Facebook owns a “monopoly” of social networking whereas Google is about the dominate the world of online advertising by taking advantage of its 3 pillar strategy that involves contextual and display advertising along with the most popular video content provider, Youtube. Until recently, the competition between the two could have been considered calm and predictable, however as both giants reach the limits of their current capabilities, it is time to look for a new adventure. This new adventure is called ‘the social graph’. The social graph is claimed to be one of the most valuable data sets in existence. In simple terms, it is a map that incorporates the connection between you as a user and all others that you interact with. Facebook has it.. Google has some part of it and wants more. Here is the underlying motive for the war that is predicted to be the biggest one in internet history.

It is needless to say that the real value behind the social graph is the ability to access and make advantage of the personalized information about millions of internet-users. By being part of a social network people literally provide Facebook with all the data it needs to build the strongest value proposition for its predicted social search engine. If facebook will ever going to be able to build its own search engine, the gathering of the troops of advertisers is only a split-second away. By having a search engine on its social interface which is able to identify users according to their preferences, habits, customs..etc ; Facebook would have a clear competitive advantage over Google. Moreover, if Facebook could find external sites to accommodate its offerings, not only the pillar of contextual advertising would be in danger, but also the second bastion of display advertising. This in return could place Google in a rather difficult situation.

The Facebook search engine would work like this

“Search results, including sponsored links and algorithmic search results, are generated in response to a query, and are marked based on frequency of clicks on the search results by members of social network who are within a predetermined degree of separation from the member who submitted the query. The markers are visual tags and comprise either a text string or an image. – Facebook patent for search”

In spite of all these speculation, the ex-CEO of Google Eric Schmidt still doesn’t believe that Facebook is the real threat for Google. According to him

“Facebook’s ads business does not displace our advertising. I’m somewhat perplexed by the obsession, because I don’t think the facts support it Microsoft has more cash, more engineers, more global reach. We see competition from Microsoft every day.”

On the other side of the game, Facebook clearly considers Google as their biggest threat for the future. Rob Enderle, an analyst from the Enderle Group stated

“Google is clearly gearing up for a run at social networking…. If anybody could put Facebook out of business at this point, it would be Google. A head-to-head competition between the two companies would probably end up with Google winning and Facebook gone” he stated.

To intensify the problems of Google, there has been recent developments about the cooperation between Microsoft and Facebook. The two companies are working together to make internet search more social. If this proves to be successful, Google might start thinking of an effective counter-attack. According to the newly elected Google CEO, Larry Page Facebook could indeed be the biggest threat for Google, however there is not much happening with Google and social networking. As a matter of fact, there are constant rumors about the possible launch of a Google Social Network called ‘Google Me’. Google Me would incorporate all the G-products in one bundle allowing the users to exchange mails via Gmail, share photos via Picasa, chat via G-talk, share video content via Youtube …and so on. The major problem with this idea is the actual assumption that people would be willing to leave their already established ‘Facebook-lives’ and change to become a ‘Google Me’ user. It is common knowledge that people don’t like changes in general. If we consider the network effect of Facebook, it is very unlikely that this particular project of Google will be successful, unless they come up with an idea that would revolutionize the Social Networking Sphere.

In conclusion, the long-term goal of Facebook (as well as the major threat for Google) is to establish its search engine that could later be extended to global web search. Once they achieved global web search, it is going to be relatively easy to do global advertising. As of today, the undisputed leader products of contextual advertising are Adwords and Adsense by Google, however when businesses realize that their advertising could be better targeted and personalized through social network capabilities, they could easily shift their advertising budgets to the benefit of Facebook. Even if Google tried to create a social networking site, the job would be extremely difficult because the situation would look just like the one in the search engine market. Bing tries to compete Google but the competition is too strong. There is a fear, that Facebook has grown too strong in the area of social networking already. No matter what, the competition will prevail and intensify in order to reach the ultimate goal of every internet company : To be the point of entry for users of the Internet. Whoever controls the gateway (the first page) will ultimately deliver the most effective advertising solutions.

This ‘clash of the titans is not necessarily bad. On the contrary, it is probably very beneficial for the internet society as there are still huge opportunities for improvement and growth both at Google, Facebook or the whole internet ecosystem. Although we can not predict the future, there is one thing for sure… The winner of this clash will not be announced for many more years.

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