In the last 3 weeks since Google+ was launched, I've been innundated on articles about the service from all directions – Newspapers, magazines, bloggers, you name it.
I've read articles about some of the great features like Circles and Video Chat that blow away what is possible on Facebook. I've read others about the genius of Google's invitation only-preview, which creates buzz and demand through exclusivity and helps avoid the problem of throwing a party no one comes to (Google Buzz anyone?).
What Google has accomplished so far with Google+ – creating a head-to-head Facebook competitor that is being taken seriously – is an impressive feat on its own. But, I'm left wondering what Google is really up to. Does the company seriously think it has a chance to challenge Facebook on its own turf? Here's what may really be going on. These are our top 3 hypothesis – from least to most probable.
3. Google is Trying to Compete with Facebook Head On in Social Networking
For the same reasons that no one has managed to unseat Microsoft as the leader in operating systems, eBay in online auctions, Apple in digital music, or Google in search, it seems equally improbable that anyone, including Google, can unseat Facebook in its core Social Networking market. When a company like Facebook creates a new market, it tends to be 'Winner Take All'. It makes sense for everyone in the ecosystem – customers, partners, developers – to go with the leader. This is why we advise clients moving into new markets to ask themselves whether they believe they can get a 50% market penetration. If not, they are either defining the market wrong or shouldn't go after it.
The 'Winner Take All' maxim applies even doubly so for Facebook and other network effect businesses where the value is directly related to the number of users. People want to be on Facebook because they want to communicate with everyone else on Facebook. Regardless of how great Google+ Circles and Video Chat are, they aren't worth much if the social network is a ghost town.
We suspect that the Google executives are well versed in the Winner Take All dynamics of tech markets and also know how difficult it is, short of a major disruption, to unseat an incumbent. Therefore, we give this option the lowest probability rating.
2. Google Doesn't Expect to Beat Facebook, but They Still Want Their Piece of a Big Market
A client of mine who used to work for GE once repeated Jack Welch's mantra that GE would be #1 or #2 in a market or it would get out. She then added that what he really meant was GE would be #1 or it would get out. The #2 was just window dressing. Likewise, it is hard to believe that Google has any interest in being #2 in anything. With $29 billion in revenue last year, a 20% year over year growth rate, an industry best operating profit of 29% and a market cap of $194 billion, the only thing that can move the needle for them is domination of a massive market. While there are plenty of businesses that would consider themselves wildly successful setting up a niche social network with millions of users and tens of millions in revenue, Google isn't one of them.
Google needs to swing for the fences. That's why the company is dabbling in self-driving automobiles, solar power stations and other far flung markets. It's looking for the next home run. So, while we give this explanation a slightly higher rating than trying to unseat Facebook, the probability is still very low.
1. Google is Practicing the Art of War
The most likely explanation is that Google+ is just one skirmish in a much larger war about where consumers live online: In Google? Or in Facebook? Do you email your friend via Google Mail or post on their Facebook wall? When you're looking to kill a few minutes on your handheld do you play a game on Facebook or search for the latest scores via Google?
Over the last year, Facebook's monthly unique visitors have grown by 17% while Google's have grown by only 7% and if the trend continues, Facebook will overtake Google as the most popular Internet site.
So what does Google do about this? The Chinese military philosopher Sun Tzu counsels, "Attack along unexpected lines" and "Give your enemy no rest". By going right at the heart of Facebook, Google has taken these lessons to heart.
In April of 1942, just months after Pearl Harbor, the US launched a bombing raid, called the Doolittle Raid, on the Japanese island of Honshu (home of Tokyo). The raid caused the Japanese Navy to redeploy units to guard the homeland, leaving the Allies free to operate in the Indian Ocean (where they had been under fierce assault). It also led Japan to pursue an all out attack on Midway Island, a launching point for potential US raids on Japan. The decision to attack Midway was a strategic blunder that all but ended Japan's expansion in the Pacific.
By creating a credible alternative to Facebook with Google+, Facebook has to strike back. But, there will be a cost to Facebook as it redeploys resources to confront Google+. Google can only pray that the cost to Facebook is as high as the Doolittle Raid was to Japan.
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