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Facebook Inc. (NASDAQ:FB) Graph Search Disappoints Investors

January 16th, 2013

money and investingDiane Alter: The excitement Tuesday among Facebook Inc. (NASDAQ:FB) stock investors and industry followers over the company’s mysterious event was quickly doused after the social networking giant announced the launch of a Facebook graph search – a kind of closed social search engine.

Immediately following the statement from Facebook CEO Mark Zuckerberg at the hyped media event at FB headquarters, shares of Facebook stock slipped more than 1% on extremely heavy volume. The news was a disappointment to many who had been hoping for something bigger, flashier and more tangible, like a Facebook phone.

The new “knowledgeable graph search” is not a Web search, Zuckerberg explained. It is a search that simply trolls Facebook’s vast database.

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“I thought that this couldn’t be done, but like any good Facebook team would do, they took this challenge. A few months later they had a version that was basically working,” a proud Zuckerberg said.

Facebook continues to try to find ways to monetize its massive 1 billion users. Graph search aims to do that by bringing people back to the site more frequently and keeping them there longer. Get A Free Trend Analysis For Facebook Inc. Shares Here!

But Facebook stock investors question if this graph search tool can really do that.

What is Facebook Graph Search?

The search is a tool targeted at providing people with answers to their cache of questions regarding people, places, photos and interests.

Thanks to Facebook’s gargantuan global reach, graph search will assist users in their attempts to find people in their network, uncover connections and find lost acquaintances. Using a variety of filters including “place type,” “liked by” and “visited by friends,” a user’s search is narrowed down and tailored by user.

Appearing as a large search bar along the top of each page, graph search will determine a series of results that can be customized by the user.

“You can edit the title—and in doing so create your own custom view of the content you and your friends shared on Facebook,” according to the company.

The search tool also boasts auto-complete, allowing Facebook users to search information about their “friends” and what they like.

Addressing privacy issues that have plagued Facebook, Zuckerberg added the search would be “privacy aware.”

In a “there’s one more thing” chaser, Zuckerberg followed the graph search announcement stating that Facebook is teaming up with Microsoft Corp.’s (NASDAQ:MSFT) search engine Bing in the launch. Microsoft shares edged higher in a nod to the collaboration.

The Facebook graph search announcement also moved shares of a couple more companies.

Google Inc. (NASDAQ:GOOG) breathed a sigh of relief, up about 1% immediately following the news. The Facebook graph search announcement put to rest the notion that FB will compete with Google’s search tool. Get A Free Trend Analysis For Facebook Inc. Shares Here!

However, shares of Yelp Inc. (NASDAQ:YELP) didn’t fare as well. Shares of the online city guide that helps people find places to dine, shop, and hang out tumbled more than 5%. Worries are that Facebook members will now use the new FB social search instead of Yelp to find recommended places.

Facebook Stock: Earnings Expectations

The social networking giant will report fourth-quarter earnings on Jan. 30 after the close. Estimates are for earnings of 15 cents a share.

Focus will be on traction gained in the mobile arena, an area Facebook was late to venture into, but one where it appears to be making headway.

Lockup expirations are winding down, and are less of a drag on the company. The last one comes in May on FB’s one-year anniversary.

Facebook stock is still down more than 20% below its debut price of $38, a level not seen since its initial public offering, and one it so desperately wants to reach again.

Facebook shares continued to tread lower in afternoon trading on Wall Street as analysts and investors digested the news, or lack thereof. Facebook stock slipped nearly 3% with just a half-hour left in trading.

Related: Social Media ETF (NASDAQ:SOCL).

Money MorningWritten By Diane Alter From Money Morning

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