Facebook's new search tool has strong potential to generate revenue for the social networking company but it is unlikely to challenge Google supremacy in web search at least in the near term, analysts said on Wednesday.
The "graph search" tool, unveiled on Tuesday, lets users trawl their network of friends to find everything from restaurants to movie recommendations and marks Facebook's biggest foray into online search.
"We see some highly monetizable category suggestions for Graph Search (restaurants nearby, games), and it should be easy to incorporate commercial search results via Facebook's partnership with Bing," BofA Merrill Lynch analysts said in a note.
Facebook currently has a partnership with Microsoft, whose Bing search engine provides search results for external websites. Microsoft also integrates certain Facebook results into its Bing search results.
The brokerage estimated Facebook could add $500 million in annual revenue if it can generate just one paid click per user per year, and raised its price target on the stock by $4 to $35.