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Summary:

Piper Jaffray analyst Gene Munster says Google has “given up on social,” because it doesn’t stand a chance of competing with Facebook. The problem with doing this, he says, is that as advertisers continue to chase the social graph, Google will have little to offer them.

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Google has been trying over the past year to inject some social networking DNA into the company by building social aspects into some of its services — and launching new services such as Google Buzz — in an attempt to keep up with the growth of Facebook, but so far its efforts have not had much effect. Piper Jaffray analyst Gene Munster now says that the web giant has “given up on social,” because it realizes it doesn’t stand a chance of actually competing with Facebook. The problem with doing this, as the analyst notes, is that as advertisers continue to chase the social graph, Google will have very little to offer them.

Munster made his comments in a video interview with Bloomberg News on Wednesday, and much of his analysis echoed the points we have been making at GigaOM for some time: namely, the idea that Google needs to be afraid of Facebook and its social graph (subscription required), because “social search” is becoming an increasingly competitive force on the web, as consumers look to their friends and social connections for recommendations rather than a simple algorithmic search. While Google is not going to disappear any time soon, it has yet to find a way to really take advantage of the increasingly social nature of the web. Says Munster:

Facebook has shown that finding information is more social-based and less machine-based, and as people trust friends more than machines, you’re going to see ad dollars shifting from Google over to Facebook.

Google has been integrating social elements into many of its services — including the addition of Twitter results to its search pages, and an update to its search indexing system to make it more real-time, as well as enhancements to Google News that allow users to customize their news (and the potential integration of Twitter). Buzz, however, appears to remain stalled in terms of mainstream adoption, and there has been little sign of any overarching social strategy, apart from comments from Eric Schmidt that the company plans to add a “social layer” to its services rather than the single Facebook competitor some expected Google to launch under the code name Google Me.

Part of the problem, as Om and others have argued, is that Google doesn’t seem to really understand social networking on a fundamental level, or have social elements as a core part of the company’s DNA the way Facebook does. Although both companies are staffed with engineers, Facebook is driven by being social in a way that Google is not. Adam Rifkin noted in a blog post last year that Google is dedicated to serving people who want to find things quickly and then leave (a group he referred to as “pandas”) while Facebook has focused on getting people to stay longer on the site, and has only recently begun expanding outwards through the use of social plugins such as the “like” button.

In his comments to Bloomberg, Munster also said that Facebook has become the cool place to work, and is stealing employees away from Google in the same way that the search company used to take people from Microsoft and other aging tech giants. Facebook “is like Google was five years ago,” according to the Piper Jaffray analyst, while the web giant is “turning into Microsoft” because it is no longer innovating. And while Facebook may be small compared to Google — with a market value estimated at $50 billion to Google’s $200 billion — Munster said that the social network’s growth rate is much higher, and that it is where “ad dollars are going to go in the future.”

Accusing Google of turning into Microsoft may be a little harsh, but there’s no question the company has so far failed to make much headway in terms of the social web, and Munster is right that advertisers and others appear to be increasingly looking to the social graph and social connections in addition to (and potentially as an alternative to) algorithmic search ads. That is a challenge Google has to find a way of dealing with somehow — and quickly.

Related GigaOM Pro content (sub req’d):

Post and thumbnail photo courtesy of Flickr user Kurt Nordstrom

  1. I love you google, but facebook wins here.

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  2. I don’t think this is true at all, Google know this is too important to give up. I think they’re stealthily building up one of the most important social networks of them all, it’s called Android – they just haven’t switched that layer on yet.

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  3. the topic is a real blurb lol,
    i think Google that always surprises us, will remove the head out of water in an unexpected manner..

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  4. Context is king. I think what we see here is the limits of “context free” intent guessing keyword search. Social just brings context to “search”, will it be manipulated like keyword search. Maybe in a few years.

    My wife was looking for a recipe before the holidays, 4 out of 10 returned results on Google’s first page tried to install SW on her machine. Then there are the content farms, without calculating the information value of any given text at least for shared context search will be useless in a few years for anything but very specialized precise terms.

    I don’t know what Google is up to, but if I want to talk about context and problems I run into, IBM Jeff Jonas (gets it), Microsoft Craig Mundie(partial). Google ???

    Their problems run much deeper than social, I would say they suck on their own Windpipe.

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    1. Agree – They’re totally reliant on search-based ads and the spammers, content farms, etc. bring them ad revenues. But, they’re destroying the results. A big dilemma for Google, they need to grow revenues but have no other way to do it.

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      1. It’s a dilemma for the whole ecosystem, all the service supported by ad dollar. Twitter is flooded with spams. If will be the same with FB when they court for more advertisers. If you have loads of users, you attract loads of spams, and loads of people trying to game your system. It’s just the way it is.

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  5. [...] Has Google Admitted Defeat in the Social Web Race?, GigaOM [...]

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  6. Google should stay out of the social network arena, keep doing what they do best. The new Android OS should be good.
    mainstreethost

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  7. While all this may be true, I wouldn’t write Google out entirely. Through Android, it still has access to a more traditional type of social network. One could potentially learn a great deal about the ways people interact with each other by following phone call trends, no?

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  8. While I agree that many people probably spend more time on FB than on Google, I simply cannot agree with this statement: “Facebook has shown that finding information is more social-based and less machine-based”.

    I simply cannot imagine that my group of friends would give me better answers AND faster for more than 95% of the searches I have made on Google in the past 3 months. In fact, I can only think of one or two searches for which I might have gotten a better answer from a friend, ASSUMING that the friend was an expert in that particular field and really knew what s/he was talking about. I suspect this is true for most people.

    The mistake that most analysts make is in talking about social search and machine search as an either-or phenomenon. That is definitely not true. The two complement each other and machine-based search will always be better for more than 95% of the searches.

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    1. The searches which bring money to Google are going to be affected. Searching for water on Mars doesn’t make Google any money, but searching for a 12 MP digital camera would. For buying a 12 MP camera people are more likely to trust Facebook than Google.

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      1. FB with its machine aggregation of many peoples opinion could offer best camera…its not just user friends openion it is collective users data…which means facebook has to do search algorithms for the best data in a closed walls vs. google doing search from open public data…

        frankly FB users may not 100% trust their friends…

        another point to note down is unless there is relevency added to FB data..like ranking based on openion..contextual ADs may not come in…

        my opinion is FB can target certain types of ADs but to show appropriate ADs lot of crunching, ranking is needed…so it is not true there are not algorithms…it just data is collected socially but need to be analyzed with algorithms though…

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  9. [...] Jaffray analyst Gene Munster says Facebook is continuing to take advertising revenue away from Google, as advertisers look to the social network as a way to reach the demographic they [...]

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  10. its like this when it comes to the web. The race is between the hare and the tortoise, but the rat wins the race. There is always some new guy who has something AWESOME to lead the market.

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