Sterne Agee analyst Arvind Bhatia raised his estimates (to $37) for Facebook following its announcement of its new Graph Search.
He believes yesterday's big announcement expands Facebook's longer-term growth opportunity and will enable the social media platform to expand into the much bigger market for search advertising, moving it past just display advertising. It "should result in better monetization overall as users spend more time on the platform," he writes.
Bhatia says he felt it was inevitable Facebook would get into search, but the announcement came much sooner than expected.
The emphasis of the announcement was on searching within Facebook. In the short-term, Bhatia sees this as an enhancement to the overall user experience on Facebook, more so than a new revenue source. It is in the long-term that Bhatia sees a big revenue opportunity.
The Bing partnership for web search received less focus during the presentation, however, and Bhatia thinks this could represent just as big an opportunity from an incremental revenue standpoint. If users swap out their regular search engine for Facebook's new one, it would be a huge milestone for Facebook and its revenue stream.
In the next few years, Bhatia says would not be surprised if Facebook developed its own search engine to compete with the Googles and Yahoos of the world.
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