At first glance, Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOG) seem to be relatively distant competitors. Google’s primary function is as a search engine that allows you to find important things such as videos of kittens, and Facebook is a social media site that allows you to see pictures of your friends, family, and former classmates. While these differences are valid, both Google and Facebook make most of their revenue through advertising. Every time you search something on Google or “like” a page on Facebook Inc (NASDAQ:FB), you give the company information. They in turn use this information to select advertisements to show to you in the hopes that you will click on it and buy something on the resulting page. You can only click an advertisement on one page at a time, so the longer you are on Google Inc (NASDAQ:GOOG) or Facebook, the more opportunities they have for you to click on an ad and send money to their tech savvy pockets. Because of this, the thing that these companies are competing for is your time. The longer you stay on Facebook “poking” people, the happier Facebook is.
When you compare the financial performance between Google and Facebook Inc (NASDAQ:FB) it is hard to see how Facebook could pose a threat to the tech-giant that is Google Inc (NASDAQ:GOOG). With net income of over $11 billion, revenue growth of 33% and a current stock price of almost $800, Google has more capital and ability to expand. They have had more success in the public market than Facebook and show no signs of slowing down. They are Goliath. But much like David had his slingshot, Facebook has a weapon of its own. This weapon is you and everyone you know.
Look up at your open tabs (go ahead, I’ll wait). If you’re like me, Facebook Inc (NASDAQ:FB) is open and you keep eying it to make sure it reads “Facebook” instead of “(1) Facebook.” People, especially the younger ones, are glued to instant updates that involve their friends, groups, and interests. This is the advantage that Facebook has that makes Google afraid. While Google also has Google+ (its social networking site boasting 343 million users), Facebook still dominates social networking with 51% of global internet users (693 million users from 903 million accounts) and an academy award winning movie. While Google Inc (NASDAQ:GOOG) allows you to search the internet, it can often be broad. Facebook Inc (NASDAQ:FB) allows you to instantly see what product or entertainment your friends like. This cuts down on searching time and gives Facebook the information it needs to send you pointed and effective advertisements.
Monetization is where Facebook is having issues. They have revenues of roughly $5.09 billion, but that yields net revenue of only $53 million. With the rising prevalence of mobile instead of desktop computing, Facebook will need to think of more effective advertising strategies or other forms of monetization such as a premium pay product. But as a young and innovative corporation, I trust that Facebook Inc (NASDAQ:FB) will have the creativity to overcome this problem.
The future of Facebook and Google Inc (NASDAQ:GOOG) depends on you and the success of their advertising strategy and monetization. If you currently own Google, congratulations! You have a wonderful investment that has more than likely already paid off. However, if you don’t have an extra $800 to spend on one share of stock, Facebook Inc (NASDAQ:FB) is attractive because of its massive growth potential. If you don’t want to invest right now, keep an eye on its monetization strategies and earnings reports. I expect you’ll see positive growth soon.
The article Fear-cebook: Why Google is Afraid of Facebook originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
