A Has Been? No Way, Google Rebounds with a Vengeance

By Brian P. Watson  |  Posted 11-02-2007 Print Email
Outdueled by Microsoft for a high-dollar stake in Facebook, the Googleplex roars back with major moves.

Before anyone had the chance to mutter "has-been," Google rebounded from social networking misfit to prime contender.

Microsoft last month dealt a blow to the search giant's efforts, winning a stake in fast-growing Facebook. The Googleplex roared back with a series of major moves, capping off an eventful few weeks by announcing Thursday that MySpace would join its efforts in OpenSocial, a platform that gives developers the tools to write applications across multiple social nets.

Before the Facebook fight came to a head, Google CEO Eric Schmidt had trumpeted the relevance of social networks, telling reporters at a recent Google conference, "It's a very real phenomenon." At the same gathering, Schmidt talked up Google's hope of selling ads on Facebook, just as it does with MySpace, the leading networking site in page views. Google's own social net project, Orkut, has fizzled domestically, though its traffic numbers fare well worldwide versus industry leaders.

Microsoft CEO Steve Ballmer had said earlier this fall that social networks ran the risk of becoming a "fad," but maybe he was sandbagging; Microsoft beat out Google for the partnership, paying $240 million for a stake of less than two percent in Facebook, which is now valued at $15 billion. Microsoft's business focus helped it achieve victory over Google, which Facebook might have viewed as a competitor, according to a blog post by Gartner analysts Andrew Frank and Allen Weiner.

The loss seemed to spell doom for Google. A win would have elevated it to the forefront of what may be the next technology boom. The ad deal with MySpace kept Google in the game, but Facebook was seen as the real prize. It's growing faster than MySpace, and speculation of its value--and future potential--has been the talk of Wall Street for months.

"Why would I jump to Google for social networking?" asks Rich Lyons, president of an eponymous consultancy specializing in social networking for businesses. "(Google would) have to give them a reason. It would have to have a feature function that would set them apart."

With the MySpace partnership, Google may very well have found it. Days before the alliance was announced, the search giant lured away developers loyal to Facebook; and now, MySpace's heft gives it even more ammo.

As businesses are finding value not only in opening social avenues to their employees but in integrating data-sharing services and applications to improve efficiency, Google has an opportunity to couple a networking service with its host of Web-based applications, which have garnered attention as an alternative to Microsoft's long-dominant Office tools. The idea behind OpenSocial is to infuse a social networking layer into its applications. That includes capabilities for Orkut, iGoogle, its desktop apps, and, now, integrating interfaces with other social networking services.

Rumors about Google introducing a multimedia phone, which Lyons says would give it a perfect platform on which to bulk up its social networking capabilities, also came into play: the Wall Street Journal reported that firm was in negotiations with Verizon and Nextel to offer phones running on a Google operating system.

Blending networking with mobility could be a powerful opportunity for Google. A win in January's wireless spectrum auction could give it added ammunition, but Google faces stiff competition in that showdown. Still, the aftermath of the Facebook fight shows that Google cannot be underestimated. And the biggest potential victim of Google's newest moves? You guessed it: Facebook.



 

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