Google’s business centers around the flow of information, which is a pretty good business to be in on the internet. Most people are coming online because they are looking for information. Google’s search service is a fantastic, albeit not perfect, tool to do this. For those of you who aren’t familiar with how Google makes money, they place advertisements next to these search results from advertisers that are targeting people interested in those keywords. So if I am selling video games, I will target people searching for “video games” in Google, and I know that my advertising will be very precise. What Google also did is they provided a tool for online publishers like myself to monetize our content by placing their ads on our websites. Anyway, chances are if you’re on this website you already understand all this. Google makes the lions share of their revenue this way, and with a market cap of more than $150 billion, it seems to be a good business model.
Facebook currently generates advertising not by targeting people searching for a particular keyword, but rather based on their demographics and interests. This is a great tool to target people within the Facebook network. At 300 million strong as of September 2009, Facebook can get you exposure to the demographics you want. There has been questions surrounding the effectiveness of ads on social networks, but I can tell from my experience that I have had more success with Facebook ads than Google. That may have more to do with the niche I was promoting, and my skills in developing ad campaigns on Google, but nevertheless Facebook ads have been effective for me.
So how do I propose Facebook is going to dominate Google? Well the company has started providing search results from outside the network, that isn’t likely to hurt Google anytime soon, but it’s definitely a good move. When you use their search feature now they also provide web results, powered by Bing. That could provide some interesting things in the future, but the real killer application I see coming from Facebook is Facebook Connect, and if/when they all online publishers to paste a Google Adsense like advertisement on their website, integrated with Facebook Connect, and therefore serving ads from the Facebook platform. Suddenly Facebook would have the ability to serve ads to billions upon billions more pages, using their demographic data, and they could also integrate contextual ads as well to target the ads even further. I could target viewers within certain demographics, regions, interests and on pages with certain keywords.
Google has their service Orkut, which is apparently still widely popular in places like India and Brazil, but it’s unlikely to be able to unseat Facebook as the North American champion. Although, some would have said the same about MySpace a couple years ago. Google has their Friend Connect which enables publishers to provide some social networking type tools to their users, but it doesn’t currently have the same punch that Facebook Connect can provide. This type of demographic targeting is the type of thing that the traditional media companies would kill for, but would never have the sense to create services that empower their users, instead they restrict them.