* Focus on people, places, photos and interests
* Facebook, Yelp shares drop
* May be initial salvo against Google - analysts
By Alexei Oreskovic
MENLO PARK, Calif., Jan 15 Facebook Inc
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
"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
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
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."