In the world of online advertising one company reigns supreme: Google. There is rapidly eroding competition in the search market and given that search is the number one source for monetization, it’s difficult to picture Google in the weak and struggling position that we see Yahoo! today. Google brought in over $16 billion in revenue last year and is on pace to surpass $20 billion this year.

So with Google in the position of king of the hill most have already begun seeking the next Google. So which company are most people in the Valley putting their money on? Facebook of course! That’s one of the reasons Facebook has achieved such a ridiculous valuation. It’s clear that the secret to monetization has not been solve and while in the next two years Facebook could potentially become a billion a year company, it still has a ways to go.

At $20 billion a year and growing Google has attracted a $132 billion valuation (as of yesterday’s stock price which has been pummeled recently) while the most recent Facebook valuations are around $4 billion (according to rumored stock sale prices). So is this a discount then comparatively speaking? Actually based on a revenue multiple Facebook is still overvalued but the shareholders buying stock from insiders are looking for rapid growth.

At this point everything with Facebook is speculation but everybody is hoping that there will be that breakthrough technology which turns social media into the next search. Many in this industry are betting heavily that social media will be the next search. I’m becoming increasingly skeptical myself though.

It’s Hard to Value User Generated Content

User generated content (UGC) has been one of the most challenging items to monetize on the web. While search has helped individuals monetize their sites, users on sites like Facebook, Wikipedia and others don’t have an opportunity to monetize the content they generate. While YouTube has developed systems for video content creators to generate revenue from attracting views, most users don’t generate any revenue.

When everybody is producing content and inventory becomes limitless how do you value what advertisements should cost? That’s a challenge facing the entire industry and ultimately advertising professionals simply consult advertisers on what the best locations are for advertising. The reality is that infinite inventory is going to continue to dilute the value of banner advertising and currently there is one premium alternative.

The Key to Becoming the Next Google: Search

Whether it’s social media or search we are still looking for the most efficient way to find content. Whether that information is about our friends or the world in general we want a way to discover what we are looking for. While social discovery is a great tool the ultimate tool for finding content remains to be search. As many people will point out, social discovery doesn’t work very well unless you have a highly active group of contacts.

If users aren’t sharing interesting news stories via Facebook, then most their friends won’t receive valuable content. That’s a big problem and it’s a fundamental flaw with the social discovery solution that so many social media evangelists give regular praise to. So if social discovery isn’t the core feature that will help Facebook monetize their site what is?

As I wrote a couple weeks ago, Facebook search provides a great monetization opportunity. With all of Facebook’s traffic, millions of users are actively leveraging search to find friends as well as products. There’s a good chance that a small fraction of users are also entering broad queries into their search box. All that’s stopping Facebook from becoming a search engine is user education.

If users know that they can search directly from within Facebook for anything, there’s a good chance that they could start using it for that purpose. This doesn’t mean that Facebook should change their vision for the company but in the short time there is a ton of opportunity for the site as it applies to search, an area that Facebook has come nowhere near perfecting.

With Search Can Facebook Become the Next Google?

If Facebook starts spending more time focusing on features that would compete with Facebook, is there the potential for them to become the next Google? Definitely! For example, Facebook’s messaging system leaves a lot to be desired but one feature where they hit the nail on the head is with message attachments. With email, the only thing you can attach currently is files but with Facebook you can attach any object created by third-party applications.

According to a couple people I’ve spoken with, Google may actually soon open up an API to Gmail which would transform the service to have similar features that Facebook currently provides for messages. That doesn’t mean Facebook can’t compete, the only problem facing them is a lack of developer resources. That’s the same problem facing them in developing a search solution.

This lack of resources may also explain Microsoft’s massive investment in the company which gave them a $15 billion valuation. Microsoft is struggling to become a leader in online search and Facebook could provide them with that opportunity. So if Facebook can develop a robust search solution and a more efficient messaging platform, will Facebook become the next Google (as it applies to valuation)?

I think there is still the potential. What do you think? Does Facebook + Search + Robust Messaging System = The Next Google?