Facebook’s bold list of changes, announced Thursday, will put more pressure on advertisers to come up with compelling content and integrate themselves further into consumers’ lives. The big loser? The “Like,” which will have a smaller role in marketing, industry analysts say.

One big change is that Facebook has added a control in the top right of each story that users can check to unmark a top story. Facebook will use that information over time to automatically edit the feeds. Since users now have more control over their news feeds, brands with boring or irrelevant updates will have lower visibility. (They will still show up in the Ticker, however.)

Marketers, who have been told for years that they’re actually publishers now, will have to put that into practice, says Ian Schafer, CEO of Deep Focus, a digital marketing firm. “Facebook is a channel, albeit a collaborative one, that needs to be programmed,” says Schafer. “We need to get people to share and interact with more content.”

How to do that? David Berkowitz, senior director of emerging media and innovation for 360i, says Facebook will now be about branding actions. “Before on Facebook it was about getting people to ‘Like’ the brand,” he says. “Now, it’s about getting people to take social actions enabled by that brand.” For example, if a consumer posts an update about a run they just took, that’s a prime opportunity for Nike. “If your run is powered by Nike, you might still wear Adidas,” says Berkowitz, “but Adidas will have to find something else that’s social about its brand to become part of your story.”

Nir Refuah, vice president of McCann Digital in Israel, says that with Facebook’s redesign, consumers will be creating a “digital autobiography” in which brands will have to integrate themselves. “First Facebook became the digital ID of everyone, and now it will try to gather our whole life story,” says Refuah.

The emphasis on lifestreaming rather than merely using the platform to amplify a message means that apps will become more of a vehicle for branding. But, like the marketing messaging, Schafer says apps will also have to be genuinely interesting to consumers and their friends. “Apps with utility that allow you to consume more or participate more will be more important,” says Schafer.

Thinking of marketing as storytelling isn’t a new concept, but the redesign will extend the metaphor. Sponsored Stories, an ad unit Facebook introduced earlier this year, are a good example, Schafer says, of marketing messages that could be of interest to consumers and their friends. How? Instead of offering basic information, like “Jim checked in at Starbucks,” Schafer suggests that something more specific such as “Jim checked in at the Starbucks on 14th Street and ordered a cappuccino,” might be a relevant part of that consumer’s life that day and of interest to friends.

The change will require new thinking from marketers who had merely tried to accumulate as many fans and “Likes” as possible. Jenna Lebel,managing director of strategy at Likeable Media, says the “Like” is “a little less relevant now,” and that marketers will have to work harder to earn their place in news feeds. “Your content is going to need to be absolutely amazing,” she says.

Colin Murphy, social media director at Skinny, a digital ad agency, thinks overall, the changes are a challenge to marketers and agencies. “He really threw down the gauntlet today,” Murphy says of Mark Zuckerberg. “You actually have to deliver something of value to a customer rather than just being a person spamming.”

Here’s a look at the new Timeline, and you can view images from the event below.

Andy Samberg and Mark Zuckerberg

Beast’s Facebook Page

Ben Parr and Jennifer Van Grove

F8 programing team

Zuck Dog

Beast

Before f8 Keynote

“I’m not really friends with these people”

Andy Samberg

Andy Samberg

Timeline Mobile

Mark’s Timeline

Mark Zuckerberg

A View of Timeline from the Audience

Courtesy of Robyn Peterson

Mark with Timeline

Zuckerberg’s Cover

Timeline

Timeline

Timeline

“Any Verb, Any Noun”

Reed Hastings

Reed Hastings

Spotify CEO Daniel Ek

Spotify CEO Daniel Ek

Watch Netflix and Hulu from Facebook

Nike+

Mark Zuckerberg and Words With Friends

Washington Post Social Reader

Running and Eating

Brett Taylor

Brett Taylor

Chris Cox

Chris Cox

Facebook Memories

Mark Zuckerberg Closes F8

Mark Zuckerberg Closes F8

More F8 Coverage:

• Facebook Changes Again: Everything You Need To Know
• Prepare Yourselves: Facebook To Be Profoundly Changed
• Facebook Now Has 800 Million Users
• Facebook Timeline: Here’s What It Looks Like [VIDEO]
• Facebook Open Graph Seeks to Deliver Real-Time Serendipity
• Yahoo Hooks Up With Facebook for Socially Curated News
• Facebook Adds TV & Movies to the Stream
• What Do You Think of the Facebook Changes? [OPEN THREAD]
• Facebook Reveals Major Updates at F8 [LIVE BLOG]
• Facebook Timeline Redefines User Profiles
• Spotify Comes to Facebook [PICS]

Apple’s iPhone 5 event on Oct. 4 will take place at the company’s Cupertino campus, not in San Francisco where all the previous iPhones and iPads have been announced.

As is the custom with the secretive Cupertino company, Apple’s not saying anything about the upcoming unveiling of its latest iProducts, but according to All Things D’s “sources close to the company,” the world’s first look at the newest iPhones will be at Apple’s Town Hall Auditorium, rather than the customary Yerba Buena Center for the Arts (YBCA) or as part of Macworld or WWDC at San Francisco’s Moscone Center.

Beyond that tidbit of information, the reasons for such a change in venue are merely speculative. All Things D speculates that perhaps the new Apple CEO Tim Cook doesn’t care for the cavernous YBCA, instead opting for a more familiar, smaller and intimate venue closer to home. Maybe the Wi-Fi or cellular data bandwidth is more reliable on the Cupertino campus, allowing Apple to better demonstrate its wares and us media types to more effectively broadcast our still photos and live blogs of the event. Perhaps the reality distortion field is more powerful there.

Beyond the location of the event, with the new leadership of CEO Cook, there are bound to be some changes in the Apple way of introducing products. For instance, we can fantasize about a live streaming video feed of the event, not superseding any of the live and sometimes entertaining comments from various bloggers, but enhancing them with a live visual record for all to see.

One thing’s for sure: Apple’s fabled secrecy remains intact, assuring billions of dollars’ worth of free publicity leading up to the event. Let us know in the comments why you think this venue has been changed after so many product introductions elsewhere.

[via All Things D]

Auren Hoffman is the CEO of Rapleaf, a personal-data aggregator that has been the subject of a remarkable amount of controversy but is wildly useful as a data provider to must-see apps like Rapportive and Gist.

While Hoffman’s company may know a lot about you as a web user and person, he knows a lot of people himself the old-fashioned way, in real life. Introduced before keynoting at Austin, Texas’s Capital Factory Demo Day as “the most-connected person in Silicon Valley,” Hoffman gave a really interesting talk about how he handles hiring at his company. I live blogged his talk on Google Plus and offer my notes below.

Auren Hoffman on hiring people to work in tech startups.

Discrimination on the basis of race, gender or sexual orientation is wrong, but you’ve got to be discriminating on other grounds, Hoffman said. “We discriminate in favor of people who work really long hours” – the people we hire are people who want to work long hours, we tell them how much we work.

A position player (specialist) vs an all-around athlete: they do one thing really well and they are really expensive. For a lot of startups, you think you’re playing football but you’re actually playing hockey. If you know what you’re doing for the next 3 years, hire position players. But if you don’t know what you’re going to do – then you should be investing in really smart people who can move as you do.

Targeting and getting back to people: when you get a resume, you should treat it like it was a sales lead. Get back to them right away, and if they aren’t the right person as 95 or 99% won’t be – let them know right away. They are putting themselves out there, do the right thing and get back to them – it will pay itself back in spades over time.

Successful people work long hours and return calls. “Are they successful because they get back to people or the other way around? I don’t know, but I wouldn’t chance it.”

Interview process: searching for Class A people, how do you do it? Resume, references: sure. The #1 way to know is to have worked with them in the past. Unfortunately you don’t necessarily have that option. A resume is one big lie. Just because they worked at Google doesn’t mean they are good. They are probably more likely to be good but it’s no guarantee.

Instead, ask a person to communicate something really difficult and make things better. If they can’t explain things to you it doesn’t mean they are smarter than you about technology. It’s important they should be able to communicate with you.

The number 1 stat that people brag about that I hate is % of people who accepted a job offer. It should be below 50%. You are making a quick decision, they can do all kinds of due diligence on you – they can make the right decision about you. You want to make sure you give them enough chances to opt-out so you don’t have to fire them later.

After people finish college, they probably grow (in their professional capacity) about 10% a year – learning and earning double in 7 years. As a startup, you can’t afford to do it that way. You need to invest in them and get them to grow faster. Spending time with them is key.

Work/life balance: you can’t change the world on vacation. Gandhi and MLK – those guys weren’t working 40 hour weeks. Maybe you’re just making a photo sharing app but you want passionate people. Look for great people, optimize for working with great people.

Question: How do you grow people faster than 10% in a year? Challenge them, don’t give them anything at their level – but one or two levels above. Try it out, see where they break. Then you know where they’re at. Now we’re going to overcome this next thing together and then let’s find the next breaking point.

Give early employees as much equity as you can - and reup them over time.

On equity and pay: It’s never going to be perfect but you should try your best to do the right thing.

The importance of cultural fit: every culture is different (eg geeky board games, gin tasting or yelling) – hiring isn’t a zero sum game because someone might just not be right for you. There are a lot of people who work at Google that I’d never want to hire – and a lot of people at Google who would never want to work for me.

(Audience question about facilitating growth in remote employees) Growing remote staff members: I don’t know, I think it’s probably much harder. We don’t outsource anything. I’d love to try it some day. But I think you’ll probably need a whole lot more process. Those side conversations don’t happen as much. Doing something after work. Where a lot of bonding might happen.

(Audience question – how do you convince a prospective employee to work for you instead of launching their own startup?) How do you hire someone against their own startup: It’s really hard and I’ve been super unsuccessful. Certain situations I used to try to convince people and now we just say “we wish you luck, we hope you’re super successful – if in the extremely unlikely event that you’re not – please come talk to us.” It comes up all the time because a lot of the best people you want are entrepreneurial.

Tips on transitioning people from big companies to small companies: It’s very hard to be successful in a big company if you’re not a position player. If you’re successful in a big co that’s probably what you are. Some people can do both but you have to spend even more time with that person. Give them lots of chances to opt out.

The biggest trouble in making that transition is telling time, an audience member asserts. Hoffman agrees: at small companies you need people who think in seconds and minutes, not days and weeks or years.

And that’s a wrap – good talk by the CEO of one of the most interesting and controversial companies on the social web.

Carol Bartz, who replaced Yahoo co-founder Jerry Yang as the company’s CEO in January 2009, has been let go by the company, according to a report by AllThingsD.

Bartz said she was “fired over the phone by Yahoo’s Chairman of the Board” in an email sent to employees today. Chief Financial Officer Tim Morse will act as interim CEO until a longer term replacement can be found.

During her 30-month tenure, Bartz presided over a tumultous period in the company’s history, as it effectively backed out of the search business by outsourcing its search results to Microsoft and shifted its attention elsewhere, primarily toward expanding its Web content offerings and entering hot spaces like personalized mobile news.

The company was already struggling by the time Bartz took the reigns and promised a new approach. The former AutoDesk CEO was hired to help turn things around, but evidently those ambitions proved too high.

As competitors like Google grew their ranks, Yahoo has had to make a series of layoffs while shuttering some of its Web properties, including Buzz, Geocities, its publisher network and its Maps API, among others. After word of its plan to shut down its social bookmarking service Delicious leaked, Yahoo ultimately decided to sell it to YouTube founders Chad Hurley and Steve Chen, sparing fearful users the prospect of having to somehow backup a few years’ worth of data.

Despite numerous changes to products and personel, Yahoo has struggled to return to its pre-2009 financial performance. Its stock price remains around $12.50, as AllThingsD points out, which is not far from where it stood the day Bartz took over.

Prior to joining Yahoo, Bartz was chair, president and CEO of Autodesk for 14 years. Before that she was VP of Worldwide Field Operations and an executive officer at Sun Microsystems.

Lead photo by Yodel Anecdotal

Update: Yahoo has confirmed Bartz departure, which is part of a larger reorganization of its leadership.

Editor’s note: Guest contributor Ashkan Karbasfrooshan, founder and CEO of WatchMojo.

With Yahoo! firing Carol Bartz—by phone no less, we are left to wonder what the next chapter will be for the one-time Internet pioneer.

So, what can Yahoo! do?  Let’s look at the options:

OPTION 1: BUY HULU

The company has been rumored to be in the running to acquire Hulu but with Hulu CEO Jason Kilar hailing from Amazon, and Google willing to pay more for the in-demand video company, chances are looking slim that Yahoo! will walk away with Hulu.  Knowing that Carol Bartz has rubbed some people the wrong way, it is possible, however, that Kilar didn’t feel comfortable negotiating or reporting to Bartz, this move could pave the way for Kilar to become CEO of Yahoo!, or, perhaps, see Ross Levinsohn being elevated to CEO and Kilar running media reporting to Levinsohn.  Anything can happen in that reporting structure, I think, with Kilar being more of a product and operations executive and Levinson more of a deal maker who is very bullish on video.

OPTION 2: SELL ASIAN ASSETS, RAISE WARCHEST OR PAY DIVIDEND

Wall Street has a tendency to misprice stocks.  Right now, the lion’s share of value in Yahoo stock is in the Asian assets Yahoo partially owns.  By now, it’s unimaginable that were Yahoo to sell those assets, its value would be $0.  Unloading assets would be a typical case of “unleashing value” and would give Yahoo! a massive warchest for acquisitions, or the ability to pay out a one-time special dividend.

With Yahoo!’s spotty acquisition record, some investors may prefer the dividend, but that would be an admission that it’s a modern day “utility”, a value stock that has no upside.  More likely would be a series of acquisitions, which may include Hulu if it remains independent and doesn’t end up in the hands of Amazon or Google.

OPTION 3: PRIVATE EQUITY

Yahoo has forever been in the cross-hairs of PE firms, who could gang up and make a run for the company.  With a market cap of $17 billion and revenues of $6 billion, it is not as far-fetched as it once was when Microsoft offered $31 per share, or nearly $45 billion.  Today the PE firm option remains a viable one, though what the PE firm’s strategy becomes remains to be seen.

The PE firm’s strategy would be to maximize the total sales price of the various components, so commence an immediate dismantling, selling off the Asian assets, unloading Flickr, and eventually selling Yahoo! to a big media company or take a leaner, meaner “Yahoo! light” public down the road.  It is conceivable that the sum of the parts could yield well over $25 billion.  The premium on those Asian assets alone could represents more than what Yahoo! is trading at.

OPTION 4: STATUS QUO

Despite what the cynics and arm-chair quarterbacks would argue, Yahoo! remains the best placed digital media company with a massive user base, a lot of advertiser relationships, strong email products and ever-increasing original content, both text and video.  And, as one of the earliest aggregators, it also has rights to a lot of content – incidentally, much of the content that Hulu has access to (disclosure: WatchMojo is a provider of premium videos to Yahoo!, and AOL, parent of TechCrunch).

Sure, the company’s choice in Carol Bartz may have seem misguided – especially in hindsight – but the fact remains, advertisers and users don’t care what bloggers or analysts say.  If the company can get its act together, it remains a force to be reckoned with, especially as Facebook and sexier firms like Zynga still need to better articulate to Wall Street and Madison Avenue what their true “net-of-hype” value is over the long term.  Last year, for example, Groupon was the “it” company; this year, it pulled its IPO.

However, with Yahoo!’s one time strength – display advertising – being increasingly under attack by both Google and Facebook, Yahoo! does need to get more aggressive in other areas, with video being as good as any.

OPTION 5: IMMEDIATE SALE TO BIG MEDIA (COMCAST, DISNEY, NEWS CORP).

Antitrust concerns notwithstanding, Yahoo! would be a very attractive distribution and new media content producing outlet and platform for a variety of large media companies, be it Viacom or Comcast.  While News Corp. may have at one time been a likely suitor, the cloudy forecast from the News of the World scandal and Rupert Murdoch’s overall bearishness over all things digital signals that News Corp. would not be interested, despite a still-impressive market cap of $40 billion.  Disney not only has a $60 billion market cap, but with former Yahoo! executive Jimmy Pitaro now at Disney Interactive Group, there’s a discussion to be had.

OPTION 6: IMMEDIATE MERGER WITH BIG MEDIA (CBS, Viacom)

CBS and Viacom (which were once one company) boast lower market caps of $16 billion and $26 billion, respectively.  As such, here we would be looking at mergers, rather than acquisitions.  Both companies would present interesting operational fits and cost savings would allow for additional value-unlocking opportunities.  However, CBS’s $1.6 billion acquisition of CNET (which I called correctly) gave it enough indigestion given the timing, so I am not sure if its shareholder base would welcome a marriage-of-equals with Yahoo!  Viacom, meanwhile, might be a better content fit anyway, but both companies need to find ways to attract and engage younger generations, so a marriage here may not actually address that challenge.

OPTION 7: IMMEDIATE SALE TO MICROSOFT

Microsoft’s MSN unit has invested heavily in the pursuit of Internet riches.  Microsoft wisely invested $240 million for a 1.6% stake in Facebook.  It then acquired the heavily-hyped Powerset to give Google a run for its money in search.  It also paid off Yahoo! for the privilege of powering Yahoo!’s search.  In the end, it hasn’t made a material impact, though a full-on acquisition of Yahoo! probably would move the needle and allow for considerable cost reductions in staff, offices and R&D expenses.  Would Yahoo!’s board welcome this?  Well, they didn’t the first time around at $31 per share.  Would it take $31 to get a deal done today?  I don’t think so, at $13 a share today, I think a $25 offer would send Yahoo!’s board running in the streets naked, chanting Steve Ballmer’s name (disclosure: WatchMojo provides videos to MSN.com and all MSN platforms such as XBOX.)

OPTION 9: MERGER WITH AOL

Last but not least, we’ve heard about the oft-mentioned suggestion that AOL and Yahoo! should merge, with Tim Armstrong running the combined operation.  I don’t buy it.  This won’t happen.  While AOL would love for this to materialize, I just don’t see Yahoo! being interested in AOL, their assets are too similar and combining them doesn’t help either one with their larger challenges (disclosure: AOL, too, is a WatchMojo distribution partner).

MY RECOMMENDATION

The bottom line is that despite what the noise suggests, Yahoo! generates $6 billion in revenues and $1.2 billion in net income, but its Asian assets are hogging its market cap.  The only way to unleash that value is Option 2, sell off those assets to let the Street value Yahoo! properly.  It could sell those assets but remain operationally involved in a joint venture or commercial agreement.

Regardless of who the CEO is, Yahoo! will remain persona non grata, so it should sell all Asian assets and maximize the cash it can raise.  It should avoid paying out a dividend – Yahoo! has the potential to become a growth stock considering that online media will surpass television advertising by 2016.

Even traditional media companies are trading for almost 15 times earnings, so selling Asian assets would be a $10 billion-plus windfall and the less opaque ownership could give Yahoo! a $15-20 billion market cap (about the same as it has now) and a potential enterprise value of $25-30 billion.  It’s foolish to think that holding on to Asian assets is Yahoo!’s holy grail when it has zero leverage on those assets (see: Alipay mess, which probably ultimately cost Bartz’ job).

With the $10 billion in cash on its balance sheet (right now it has $2 billion) it can then start to position itself as the leading video company and take on YouTube.  The reality is that Hulu is number 2 in video but its own future is in doubt; VEVO’s fate will mimic that of Hulu’s (it will become a victim of its own success), while Facebook has yet to really focus on video properly.  The future of Web content is in video, IMHO, and that remains Yahoo!’s last chance to reclaim its once-lost glory.

Photo credit: Shezamm

Ben Elowitz (@elowitz) is co-founder and CEO of media company Wetpaint, and author of the Digital Quarters blog about the future of digital media. Prior to Wetpaint, Elowitz co-founded Blue Nile (NILE). He is an angel investor in media and e-commerce companies.

Next year, search advertising will be a $15 billion market in the U.S. alone, growing by 14 percent, according to eMarketer. And, if Facebook can capture half the share of that market that Google has today, it could easily add an extra $25 billion or even far more to its value.

For most any CEO who could have even a modest chance of succeeding at it, that payoff would be reason enough to take a serious look at entering the search category. And yet, while I’m sure he wouldn’t scoff at the extra revenues, profits, or valuation, I suspect that Mark Zuckerberg finds something else far more motivating than just increasing the financial value of his company.

And that’s what will propel him next year to make a completely disruptive entry into the search category.

So if it’s not for the financial value, then why am I so certain that Mark Z. will make a play for Google’s home turf?

It’s because it’s so irresistibly good for his users. And that’s the most important principle that seems to guide his product development.

The Five Reasons For Facebook To Enter Search

With that in mind, here are the five specific reasons why Facebook should enter search next year:

1) To make Facebook the ultimate home page. Consumers make Facebook their home base. Half log in every day; and users come to Facebook 70 percent more times per day than even to Google. They stay twice as long as even users of Yahoo’s vast network of email, content, and more. Facebook has become the Connected Web’s de facto operating system. But right now, its “start button” is limited to what other people put in your newsfeed. Part of being home base is being a launching pad to go anywhere you want. So Zuckerberg will need to give users a great connection to the rest of the Web – whatever their intent.

2) To fix a broken feature. Facebook has a search feature today (powered by Bing); and a few people already use it for Web-wide search, even though it isn’t very good. It needs significant upgrading, and Zuckerberg knows it. Having a feature this important be this incomplete creates an unacceptable user experience. It must be fixed.

3) To improve people’s life online. Facebook has an enormous data set that it can use to deliver better search results than anyone on the planet. Facebook can see everything that Google can see in terms of pages and links, but with a whole extra dimension of human connection that is impenetrable to Google. Facebook knows what your friends like, and what people like you like. And it knows the difference between real interest and spam. Translating that knowledge into great results will improve online life for his users.

4) To fully connect the world. More than anything, Zuckerberg and his company’s DNA are all about providing services to connect users to each other and, increasingly, to the world at large. Serendipity and sharing aren’t enough: sometimes people know what they want to find. Facebook must have a search feature to fully enable connection.

5) To add to his immense data set. Search will not only help users; its users will help Facebook. Specifically, it will provide Facebook with even more data about what people want so Facebook can further personalize itself for everyone. Go ahead and cue the creepy privacy music, but remember that so far most users have been happy to make a privacy tradeoff to get valuable personalized service.

With Facebook Connect, Open Graph, and Like buttons, Facebook has already shown its vision to fully connect to the rest of the Web. The next step is to help people better access it.

Facebook: The Social Operating System For Connected Lives

Facebook began as a social application, but it’s now in the process of becoming a Social Operating System for the Web at large. Offering world-class search is the next step in its evolution as that “Social OS.” The Web is now organized around connected people, not documents – and Facebook is the OS that links those people together.

Once fully connected, can you imagine how Zuckerberg must think about a Web all wired-in through Facebook’s central hub? He’d know the time spent on every page; the usefulness of every link; the patterns of every user. He’d have a real-time system that provides feedback on every recommendation. You know what’s cooler than a billion connections on the Web? How about a quadrillion!

The value of that data will be immense in making recommendations to users, serving advertisers, refining search itself, and enabling next-generation social applications. It will give Facebook a competitive advantage over every other Internet company in building a map of where the gold is buried – in the form of the content each individual user wants – among the trillions of pages on the Web. But more importantly, it will allow Zuckerberg to serve his users.

“Social Search” Is More Than Just Links From Your Friends

The idea of a socially-powered search is not brand new for Facebook. Bing and Blekko have both incorporated features that bring your friends’ Facebook content into the search results. And while that is one modest way to improve the search, its impact pales in comparison to the full potential of what Facebook can do to help you by fully exploiting its social data set: It can individualize search results just for you, by using not only data about you and your friends, but by using the full dataset of people you haven’t even met yet.

Let’s look at it competitively. Google and Bing have, with limited exceptions, held themselves to the standard that the results should be the same for everyone because they work in an anonymous environment. A friend from Microsoft tells me that Bing has a rule that, with the exception of bucket tests, the top ranked result must be the same for everyone. This rule, he says, was copied from Google – where it fits well with Google’s increasing positioning of itself as the great defender of identity control, compared to Facebook’s ethos where everything is public. But that differentiation hands Facebook an incredible opportunity: in the Facebook environment, it’s not only accepted but expected that everything you do is customized for you alone.

Can you imagine the power of combining Amazon-like personalization with Facebook’s deep dataset to offer better results?

Facebook Can Redefine Search in a Social World

That’s why beyond just improving a search algorithm, Facebook’s greater opportunity is in redefining the category. The last decade of Web use has been defined by Google’s clean white splash page with a single query field, and the 10 blue links which follow. But just as that approach from Google displaced the prior generation’s directory pages, it’s time for a breakthrough experience. And Facebook is the natural player to provide it.

I’m sure the engineers at Facebook are already visualizing what search could be in a fully connected world. Searches could be proactive, prompted by items shared by friends, rather than awaiting a text field completion. Searches can favor brands and publications that you like, or your friends like. But most importantly, searches can be predicted based on people like you, people who are located where you are, or people with similar interests, profiles, and behaviors, without you ever even knowing them. All of these are ways that Facebook can fundamentally redefine search, thanks to its knowledge of each user’s identity, interests, and behaviors.

How It Could Happen in 2012

But building a search engine that takes (a difference-making) advantage of the social graph takes lots of time and money, as does building a new operational infrastructure, Web crawler, and advertising engine to support it. And, even more significantly, this is one where Zuckerberg will need to get the privacy implications right from the start. Facebook is currently building its rep with major advertisers on its social network – and that’s a great start, because that will provide a captive customer base to transition into its search engine right at launch.

A competitive search engine is one of the most ambitious projects you can imagine – the degree of difficulty is mind-boggling, and the cost is hundreds of millions or more. For Facebook to best Google, it would need to catch up in substantial ways before it could shoot ahead of the leader, even with its valuable dataset. But that’s only an impossible challenge if it has to do it all alone.

And Facebook doesn’t have to.

It already has an alliance with the #2 player in search, Microsoft. And – in the way of “the enemy of my enemy is my friend” – it has a common interest in outperforming Google. And Facebook and Microsoft have enough separation between their businesses that they could complement each other rather than compete. Indeed, Facebook’s increasing strength in its advertising engine could be a huge lift to Bing’s struggling monetization – offering hope of raising Bing’s monetization toward Google’s levels. The two truly are more valuable together, and it’s no surprise that smart people have begun to speculate on a Bing-Facebook combination, a step beyond a partnership. Working with Bing for its search entry could save Facebook billions of dollars of initial R&D and speed its entry into the category by years – and by many dozens of engineers. And any agreement they’d sign would likely still give Facebook the option to create its own search engine down the road.

The Chilling Threat To Facebook’s Enemy

Regardless of how Facebook structures its efforts – and with whatever degree of help it gets from Microsoft – it will be able to create a search capability that will be significantly different from anything we’ve ever seen. And it will shake the tectonic plates underneath Google’s Mountain View headquarters, even as it vies to earn users’ adoption with better, more personalized results.

Google will not perish in the digital earthquake without a fight, though. Its recent Google+ launch, for example, shows just how boldly Google intends to enter Facebook’s home territory. That, of course, makes it even more imperative for Facebook to counter-invade by pushing into search.

Looking forward, it’s clear that search and social won’t always occupy separate spaces. Indeed, for consumers, over time, they will converge; and the blended (or, just as likely, reimagined) product that emerges will serve as a home base that will serve as a jumping-off point to everything that’s important and relevant on the 21st century Web.

It’s fascinating, and it’s all about to unfold. In the meantime, while Zuckerberg quietly forges ahead, and readies Facebook’s game-changing search entry, Eric Schmidt, Google’s former CEO, is publicly lamenting lost opportunities to catch Facebook. The diverging fortunes of these two digitally defining companies could not be more apparent right now.