Now that the initial noise about Facebook, Inc. (NASDAQ:FB) and its beta project Graph Search is over, investors have the opportunity to digest and understand that this is not a traditional search on the Internet, but instead an algorithm to use a Facebook base of friends to uncover critical information like "Where's a good place to rent a bike in Grand Rapids, MI?" For someone sitting in New Orleans, this question has no relevance unless that person plans a trip to the Midwest soon. Bottom line - Graph Search is local search.
Of the hundreds of opinions preceding and immediately after the Facebook announcement, only a handful seemed to understand the implications, or lack of them, for search. Out of Facebook's total number of members only 100,000, or 0.01%, will trial Graph Search so its purpose as a meaningful search engine, if there is any at all, is years away. However, there is tremendous upside to Local Corporation (NASDAQ:LOCM) because any information culled from Facebook friends is bound to be skimpy and of dubious fact. Friends will inevitably turn to the Facebook search engine Bing, with which Local has an advertising partnership. And later when searching locally, they will ultimately use Local.com.
Fans of Graph Search point out that it is a highly "customized" search engine. In that case, Local does the same thing as Graph Search through its specialized consumer channels, or verticals, except Local makes money at it. Local has an HVAC vertical and a car insurance vertical. These are two very specific searches and would be far easier to use to find a contractor or vendor, so polling Facebook friends for similar information would be moot.
In short, Graph Search relies on local information, local to me, where I am right now or where I'll be at some time in the future.
No one is sure of Graph Search's value but it can only help Local. Graph Search is local search, and local search is mobile search - half of all searches on mobile devices seek local information, according to Google. There is one company that ties it all together: Local Corporation.
Said another way, to monetize a mobile social network, Facebook needs to go local. Facebook users on Graph Search will be looking for things or places close to them. Local will be needed for that.
Mobile is emerging as the recognized leader in search options. YP, North America's biggest corporation in local search, media and advertising, has data showing that the closer a user is to a business, the more likely they are to click on that businesses' mobile banner ad. YP also reasons that local search is so pervasive because smartphones and tablets, the ideal search tools, are everywhere, making it easier to search. Because they're almost always on, barriers to searching are lower. Smart phone users search more than PC users - 13.5x versus 5x per week.
Search data is changing. Before, it contained a name, address and phone number and perhaps a brief description of the business. Now, a much wider range of information is available, including hours, location, directions from the consumer's location and dynamic information that can change by the hour, such as product availability, prices or specials. There is no way Graph Search could keep up with this. Local truly dominates local search.
Mark Zuckerberg has a problem. He does not seem concerned about monetizating his creation, only interested in enhancing the Facebook user experience. However, shareholders like their companies to make money. Facebook would need to compile more robust data on members to entice advertisers. To do that, it would have to require more information in a member's profile that could perhaps border on privacy invasion or scare members already afraid of identity theft. Two years ago Zuckerberg pushed the social network envelope with "Groups," allowing users to put friends in categories without prior approval of the friend.
Clicking to dial a local business through Facebook's Bing should further line Local's pockets because it owns the highly specific Enhanced Directory Assistance patents.
In other company news, Local's seven year relationship with Yahoo Inc. (NASDAQ:YHOO) gave them entrance into the UK market for local search along with a bigger ad deal with Yahoo, covering the US and the UK. From a revenue perspective, compare this with Yelp, Inc.'s (NASDAQ:YELP) 88% boost in top line growth in the first year it entered the UK market in 2009.
Another stunning quarter was just reported where Local's core business of organic traffic jumped 51%, to 45 million monthly unique visitors and mobile traffic, or users searching by cell phone, gained an astonishing 220% to represent 25 million people.
Social media and in particular mobile social media fuels local search and I believe that Local Corporation is perfectly positioned to reap the benefits of social media traffic and in particular the benefits of Graph Search, if it really takes off the way Mr. Zuckerberg seems to think it will. With each social mobile search that ends up on Bing, via Face book, Local has the potential to generate ad revenues for serving up local information. Further, Local's patents and monetization platform for Enhanced Director Assistance will be another key revenue driver for Local.
When I am on Facebook and see my friends are gathering at the hot new local restaurant, I just may search for more info on the place, and Local will serve up the ads. The Restaurant's phone number will be right there on my smartphone. When I press the dial button for a paid number, I've just used Local's patent. Monetizing social and mobile is something Local could teach Facebook a thing or two about. Local Corporation has the infrastructure and the IP behind it to monetize Graph Search.