Analysts: Facebook's Graph Search Probably Won't Hurt Google

But Wall Street analysts say that it doesn't pose an immediate threat to Google's core business of searches which express a commercial intent—queries which suggest a user is ready to visit a business or buy an item.

Merrill Lynch analysts think that Graph Search could eventually challenge Google in some specific search categories over time, Reuters reports.

Graph Search, which is still in beta, lets Facebook users find people in their circles of friends and acquaintances, local businesses, and movies and TV shows. In its current version, it doesn't return much in the way of results for shopping-related searches, which is where Google makes a disproportionate amount of its revenues.

When Facebook's Graph Search doesn't come up with anything, it defaults to a search from Google's main search competitor, Microsoft's Bing.

"Looking forward, Facebook Graph searches could be competitive with certain categories of Google searches, such as Places & Maps," analysts said.

Even though Facebook's Graph Search isn't considered to be a huge threat to Google in the near future, analysts still say there's a lot of potential for the new feature to generate revenue for the company.

"We see some highly monetizable category suggestions for Graph Search (restaurants nearby, games), and it should be easy to incorporate commercial search results via Facebook's partnership with Bing," analysts said.

Facebook could easily monetize Graph Search with paid search results or Yelp-like local advertising listings if enough users are searching on the platform.

Facebook already has an ad product, Sponsored Results, which appears among the suggestions Facebook users see when they do a search. Those ads predate Graph Search and the launch of the new product isn't changing them. It's not clear how much revenue Facebook generates from these ads.

Analysts calculate that if Facebook could generate at least one paid click per user per year, it could bring in an additional $500 million in yearly revenue.

But the true success of Graph Search depends on Facebook bringing it to mobile, analysts at J.P. Morgan said.

That's because Graph Search relies heavily on local information, and half of all searches on mobile devices are for local information, according to Google.

"Overall, Graph Search offers users a unique view to information not available on Google, but does not replace Google," Piper Jaffray & Co analysts said. "We view the relationship between Facebook Graph Search and Google as both competitive and complementary."