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Facebook’s (FB - Analyst Report) new tool Graph Search that was in beta stage since January will be rolled out as a full-fledged service over the next few weeks. The company recently announced its plans to expand the new search tool to users who  use Facebook in U.S. English.

According to Facebook, Graph Search will search for a specific query among contents that are shared by users and are publicly available within the social networking platform.

Moreover, the search results can be customized according to specific time frames, locations or other information that are available on user profiles.

To make it more effective, Facebook is using Microsoft’s (MSFT - Analyst Report) Bing search engine to deliver additional search results when Graph Search is unable to find relevant answers. The company also said that it is working on a mobile version. However, Facebook did not announce a specific launch date.

Facebook’s Graph Search service is expected to increase user engagement; thereby increasing traffic on the site. This will bring in more advertisers to the social networking platform, which will further boost advertisement revenues.

Further, the personalized search service is expected to improve the company’s competitive position against Google , going forward.

Facebook has significant growth opportunities from increasing online advertising spending compared to traditional formats. According to eMarketer, the U.S. digital video advertising market is expected to grow 41% in 2013 to $4.1 billion from $2.9 billion in 2012.

Moreover, eMarketer predicts that the mobile video market is expected to double this year, touching $518.0 million, which represents a tremendous growth prospect for Facebook. We believe that it needs to focus on rolling out the mobile version of the Graph Search to capitalize on this tremendous growth opportunity.

Although Facebook’s mobile monthly active users (MAU’s) continue to grow significantly (up 54.0% year-over-year to 751 million at the end of first quarter), we believe that increasing competition from Google and LinkedIn (LNKD - Analyst Report) remains a major headwind in the near term.

Additionally, increasing investments related to infrastructure development may hurt Facebook’s near-term profitability.

Nonetheless, the continued investments should improve the quality, engagement and value of its ads, which will further boost advertiser demand in 2013.

Currently, Facebook has a Zacks Rank #2 (Buy).

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