Shares of Facebook (NASDAQ:FB) closed out the trading week at $31.54. The stock, up 18.48 percent since the beginning of the year, is showing its sensitivity to catalysts ahead of its earnings release on January 30.
Last week, Facebook rolled out the beta form of a social search service called Graph Search, generating a flurry of activity but ultimately pulling the stock down. For investors, Graph Search is a long-term revenue stream but it won’t come online for a few years. At the launch, CEO Mark Zuckerberg indicated that there were no monetization schemes in place yet, and that the entire service would take years to flesh out.
Down the road, Graph Search looks like a competitive threat to Yelp (NYSE:YELP), given their overlap as recommendation engines. Currently, both services attempt to answer similar types of questions for users, such as where to eat, or who likes what. Both services are only as valuable as the content their users provide. If the experience is comparable, it seems likely that most people will pick Facebook when given a choice — after all, Americans overwhelmingly spend more time on Facebook already than any other site.
It’s also easy to imagine how Facebook might pursue monetizing the service after it rolls out to a larger audience. Advertisers will line up at the door in the future, but Graph Search fails to address some issues currently facing the company, such as a drop in active users and a unfavorable mobile trends…