Ari Kuchinsky writes about the stock market, technology and often the intersection of the two.
In my last post, I wrote about how the combination of Google and Twitter is inevitable. The Google+ button sure would look much better if it was merged with the Tweet button. Right now the Google+ button looks sad. From my observations, the pecking order of sharing is Twitter followed by Facebook with Google+ and LinkedIn as afterthoughts. If the Tweet button became a combined Tweet+ button, Google would immediately become the leader in shares over Facebook. This is a powerful statement that would be reinforced on every website with social sharing buttons.
I’m surprised that most people do not see the potential of Google+. The general narrative is that people generally will only join one social network once network effects are built up and people are invested in that network. Put another way, after I learn how to use Facebook, upload all my photos and connect to all of my friends, why would I go through the time and energy to switch to Google+ or maintain accounts on both platforms? The common conclusion is that Facebook is executing great, people are locked in and invested in it and that they won’t switch over to Google+ in any meaningful way.
I think this conclusion would be right if Google+ was another social network using the same structure as Facebook. With Facebook, the site itself is a destination. You use the Facebook app to socialize with family and friends by sharing notes, pictures and playing games (and sharing advertisements). Facebook provides entertainment, but it isn’t a tool. Google can provide entertainment, but most of its services are utilitarian (e.g, search, maps, news, shopping).
Facebook is a destination, Google+ adds social to Google’s services
Google+ could become a destination, but I see its true value as adding a social component to Google’s existing services. For example, if I’m using Google maps for directions to a restaurant, I might see that a friend using Google+ is checked-in at that restaurant or has written a review for the restaurant. I might also see the location of other friends around my city. If I decide to view a video on YouTube!, I might see a recommendation from a friend to view another video. If I’m already reading the news in Google Reader or through Google News, it would be cool to notified that Josh Brown has a new post or that he has recommended a post. If I’m searching for a product using Google Shopping, it would be fantastic to see reviews from people in my network that I trust.
With regard to search, I imagine that the social component will enhance relevancy and also add a social aspect to search (e.g, endorsements of a particular website or webpage within a website).
In all of these examples, the social component would permit me to socialize with my network on Google+ through the particular Google service that I’m using. So if I map out a restaurant on Google maps, I might ask the person in my network that ate at the restaurant “what do you recommend?” or “where did you find parking?” The question would show up as an alert on the person’s smartphone.
The Lifebook Component
In my opinion, the last part of Google+ to fall into place is the Facebook style sharing of photos, notes and playing games among family and friends. Once people buy into Google+ because of how it adds to the user experience of Google’s existing services, it doesn’t seem so far fetched that people will start using Google+ as a destination. But whether or not this happens, it isn’t necessary for Google+ to be successful.
Putting aside the privacy concerns (this could be a separate post), the data mining diary component of Facebook is powerful. The new timeline feature will record people’s lives. The existing Facebook is mostly comprised of the user overtly populating it with data. For example, you type in your birthday and your favorite food. The next generation of social won’t need you to fill out a form of your likes and dislikes. Instead, your actions will speak for you. If you have checked-in to 3 different ski resorts during the winter and recorded your trip on Facebook or Google+, it can be inferred that you like to ski. If you also have installed an app to record your workouts (and all of these new social apps will be able to feed data to both services), the combination of skiing and working out could be a strong inference that you are in shape. If you also follow finance related people, multiple ski trips and an interest in finance almost certainly infers affluence.
My point is that filling out a profile on a social network is old school. It is the aggregation of the data points that we put into these social networks that will be the gold mine for marketers. The social networks may end up knowing us better than we know ourselves. I can only imagine what a dating site may look like in 10 years.
The hard part about building any network is building network effects. It practically takes a miracle to generate momentum to get people to invest the time to sign up for an account and build an active user base. For Google, this should be a pretty easy task. If you create a new Google account now, you’ll automatically be enrolled in Google+ (this includes all of these new Android installations on phones and tablets). Google could also simply turn on Google+ for anyone that has a Google account. Also keep in mind that if you have an Android device, no sign-in to Google+ is required. You’ll always be signed in. This is a big deal over requiring people to sign-in.
All of this allows a lot of people to participate without signing up or signing in. Because profiles will be filled out through the aggregation of data points instead of users populating their own profile, I don’t think it matters if people fill out their Google+ profile. Filling out a profile is old school.
Google has been moving slowly to populate Google+, but Google has the means to populate it quickly and build the momentum necessary to bring a valuable social component to its existing services.
Is Facebook Already Dated?
Facebook and Google+ are vastly different and I don’t see this as a zero-sum game. I personally think that a social component layered on top of Google’s existing services could be much more powerful and relevant than Facebook. Facebook is a random stream of what your friends and family are doing. With Google+, I’m already using a Google service because I want to be there. If I’m in Google Reader, I’m much more likely to be interested in seeing news from my network than if I’m just flipping through the Facebook stream while riding the elevator down from my office. Likewise, if someone sent me an email to watch a funny video on YouTube!, I’m more likely to be in the mood to click on another video shared by someone in my Google+ network than seeing a random share in my Facebook stream. In my opinion, Google’s method of layering social on existing services is the next generation of social and Facebook’s destination approach is antiquated.
I look a lot at relative value when I invest. The $100 billion Facebook IPO has made me think a lot about Google. I call it the “Facebook put.” If Facebook is worth $100 billion, Google sure looks cheap. After all, both companies are in the same business—online advertising. Google did $35.76 billion in revenue through the year ending September 30, 2011. I’ve read that Facebook will do about $4 billion in revenue this year. Facebook is looking to be the next Google, but Google is already Google. Yet, Google may have a valuation of less than 2x Facebook when Facebook comes to market.
Facebook is valued at $100 billion and Google+ is valued at $0. The general thinking seems to be that Facebook will be the sole player in social and that things are just getting started (the latter part is probably true). Eventually, the thought is that Facebook’s social ads could rival or exceed Google’s search advertising. I believe that social networking will play out differently than people expect. I think Google+ is starting off slow, but that it will end up being a huge winner. In a few years, there will be two big social networks—Facebook and Google+.
Disclosure: Long $GOOG
Awesome, thanks Ari!
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