lunes, 30 de mayo de 2011

Google vs. Facebook: Who will dominate the future of internet?

It's time to place your bets!
After enjoying several years of unrivaled leadership on the online world, Google finally has a contender that might be up for the challenge to be the "synonym to internet". The question now is not only if these two giants will co-exist harmoniously in the digital eco-system but also if this is a battle that needs an undisputed winner. With Facebook's IPO approaching, it seems that Zuckerberg's company will be targeting the latter option.
It is interesting to see how these two websites that took-off with completely different products have so many similarities nowadays. While Google still is known the king of search, they also rule on other areas such as  online advertising, video, email, and several other products. On the other hand, they were never able to succeed on Social Networking, which is Facebook's core strength. Facebook has been so successful in Social Networking to a point gave them enough muscle to fight in other areas such as search (through the Microsoft partnership), advertising, most recently integrating the Facebook messages and chat to SMS and.. email! In sum, Facebook and Google are doing generally the same things, though with a different packaging.
The crucial similarity though comes from the revenue stream. Both companies make their money mainly out of advertising, While Google currently has far more ad revenues than Facebook, the latter has shown higher growth in the recent years. Digging deeper, we can see the explanation for the faster growth in Facebook by considering one important difference between both: while they make so much money out of advertising due to the targeted ads which in turn are enabled by all the information both companies have from the users, the source of this information is completely different. While Google knows a lot about the users based on screening of searches and emails, Facebook knows EVERYTHING about the users simply because these users gave them this information willingly, free of charge.
Another way of analyzing this battle would come from web analytics metrics:
In Alexa, Google is the top ranked site worldwide, followed by Facebook and Youtube.
On Compete.com these metrics are very similar, with Google having a good lead in unique users, though Facebook has been consistently closing the gap, especially after the Social Network film.

This data alone, could give the false impression that Facebook still has a long way to catch up with Google in this competition to become the dominant online platform. There is an important piece of information missing on this puzzle though, and that is the time spent on site. By this metric, we actually have a clear winner, and this would be Facebook!

source: alexa.com
While users spend an average 13 minutes per day at Google, Facebook clients spend almost 3x more of they're time on the website! On the long run, this difference could translate to a major power shift in the advertising revenue.
Even though Facebook has managed to achieve traffic metrics that are comparable to Google (which is very praiseworthy), they still have not been able to monetize as effectively and quickly as the search giant. In fact, as they celebrate the 7th anniversary in 2011, Facebook only makes 2/3 of the revenue that Google had in the 7th year. Several analysts do estimate though, that this might change in the following years and its a generally agreed that Facebook's goldmine is based in the years to come.


All in all, its is still hard to point out who will be the winner in this battle although its clear that it will be a good one! According to Hubspot, Ad-words has lost much of its relevance in advertising compared to social networks. As the market becomes more mature, marketers will end up having to decide on which channel to allocate most of the advertising budgets and this is where blood will start to spill. In the private equity market, many investors are betting that Facebook still has a lot to grow and could have what it takes to at least tie the game. In the beginning of 2011, Goldman Sachs bought a part of the company, valuating it at 50 Billion dollars. Presently, Facebook has been trading at the online private equity site sharespost.com by $33 per share, which translates to amazing $75 Billion, or $115 per user!  Google is valued roughly twice as much, at $167 Billion.
Personally, I think Facebook has what it takes, especially given their loyalty with the younger crowd. I now pose this question to the reader: Who do you think will win this war? Google, Facebook, or a there is still space for a third contender to join the race?

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