Facebook Nearby: What Does It Mean for the Local Market?

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Precis

Earlier this month (on December 17) Facebook transformed its “Nearby” mobile-app friend finder into a local search tool. Nearby had previously been a way to locate friends who had enabled location or checked-in somewhere in the immediate area. The new (mobile only) Nearby is a logical and complete overhaul of the service, which holds significant implications for the entire local search landscape – with one major caveat.

Everything depends on Facebook’s commitment to Nearby and how much the company is willing to invest in local.

There has long been an expectation that Facebook would get into search, beyond its existing relationship with Microsoft. A robust search capability on Facebook could provide significant new revenue, in the form of paid-search ads, as well as greater utility to Facebook users overall. The question is: what is the scope of Facebook’s search ambition? Would it be limited to better site search or would it extend to web search more generally? It’s likely that Facebook will take a kind of middle course that relies primarily on site search but holds competitive implications for Google and others. Nearby is something of a model.

All the data in the Nearby “index” are provided by the businesses themselves. Facebook doesn’t show places for which it doesn’t have local Pages. This is by design, partly as an incentive for SMBs to create Pages for their businesses. The company isn’t licensing data or crawling the web for local business information. This makes the database potentially more reliable but also less extensive than competing offerings. There are other significant user-experince limitations as well. 

Notwithstanding these current limitations Facebook Nearby could become a major competitor in local search relatively quickly. We won’t have a sense of how real that possibility is until roughly the middle of next year. By then we will know something about consumer adoption, as well as Facebook’s commitment to improving the service.

But despite Facebook’s privileged position in the marketplace the company doesn’t have years to develop Nearby. In order for Nearby to succeed, it must become more visible to consumers. It also must improve considerably during a time-window that is probably not longer than 24 months. Otherwise, Nearby could easily go the way of Facebook Deals and simply be remembered as a provocative experiment that failed.

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