Facebook Keeps Up the Attack on Google with Local Ads and Netflix
With its extra $1.5 billion in funding, Facebook acquired hyper-local mobile ad start-up Rel8tion. The intent of the stealth start-up was to mix location and demographics to serve the most relevant ads. And there's also word that Netflix plans extensive integration with the social network.
Hmm, local mobile ads and bringing movies and television to users. Doesn't that sound like ... Google (GOOG)? Facebook has clearly targeted many of the areas that the search giant sees as crucial to its own growth. And it gives a picture of how Facebook sees itself: as the natural evolution of the portal. It wants to be an online water cooler, where people spend time to talk with others and, as a result, give Facebook an opportunity to dominate the Internet industry.
Given that more than 100 million people connect to Facebook through their smartphones, the company has an enormous edge over Google when it comes to mobile advertising. As Android stands now, Google has to wait for people to start a browser and search the Web to launch ads, and then they may only be on for a few minutes. With Facebook, people stay for a while. It's a natural platform for ads.
Creating a local ad capability also suggests that Facebook could well be working to create a local coupon service, like Groupon, or the one that Google plans to build. Ads and coupons go well together.
Netflix is another example of Facebook trying to face down Google. YouTube has reportedly still not turned a profit even five years after its acquisition. Facebook already serves a lot of short-format video through link sharing. In fact, it's the second biggest driver of video traffic after Google. Adding Netflix could significantly increase that amount.
There's been anecdotal evidence that people already turn to Facebook as an alternative to search. Not surprising, as Google's rate of satisfying user searches is only about two-thirds. A big chunk of the time, people need another source for answers.
And Google's relationship with Demand Media has further affected its standing, as low-quality content often pushes other results out of immediate site. Although a Google blog post suggested the company might address the issue of content mills, Demand's CEO, Richard Rosenblatt, claims that relations between the two are better than ever, and that its sites will continue to do well in Google search results.
Not that everything is smooth sailing for Facebook. The company continues to get in its own way. Letting companies turn Facebook users posts into advertisements may bring in dollars, but it will likely create a lot of consumer resentment. If an individual is used to sell a product, why isn't that person getting paid?
However, if Facebook can avoid shooting itself in the foot too often, it will put a big cramp in Google's style.
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