Google (GOOG) is accustomed to being in the top spot. It leads search and virtually owns the online ad space. Its Google News portal is among the top sites for directing traffic to media outlets. But, the behemoth is starting to feel the feet from social media sensation Facebook.
Not only is the rather young platform stealing market share from Google News, it's now encroaching on its e-mail turf ... a situation that Google isn't taking lightly. To compete more effectively with Facebook, Google is upgrading its Gmail capabilities to include more social media tools reminiscent of those found on its competitor.
Google's eminence is under assault. According to data from ComScore (SCOR) Media Metrix, it boasted 173 million U.S. visitors in December, up 16% from the year before. It's lead over Facebook is wide, but closing. For December 2009, it posted 111.8 million visitors, making it the fourth most visited site in the country. Its growth rate is what must be causing the alarm at Google: Facebook posted a staggering 105% gain from December 2008 to December 2009.
The situation is starting to look a lot like the one Microsoft (MSFT) encountered in the mid-1990s, when it didn't respond quickly enough to the commercialization of the Internet, a misstep it's spent the past 15 years trying to remedy. Google appears to have let the social media market zip on by, and now it is looking to make up for lost time.
Perhaps the greatest indicator of the missed opportunity is the talent flight from Google to Facebook. Several former Google execs now work for the popular social networking site, including Facebook's chief operating officer, Sheryl Sandberg, who helped develop the Google AdWords program (Facebook now has a similar ad model).
Greg Sterling, an analyst at Sterling Market Intelligence, told USA Today, "Initially, Google misunderstood social media and its significance." He continued, "They've got the religion now and have been trying ever since to add more social utility. Social is how the web has evolved." Yet, Sterling doesn't believe that Gmail is the place where Google should enter the fray, saying, "Gmail is a good product as it is. I'm not sure these tools add anything except to make it more bloated."
Yet, Google has to start somewhere.
Features are still being revealed, including a new social search tool that includes "results from people in your social circle." Participants are required to supply Google with profile information that includes interests and contacts. Since it isn't mandatory, few have participated. To turn this into a valuable asset, Google will have to promote it more aggressively.
The goal of the inflated Gmail application is to keep users in the environment longer, serve them more ads that are highly targeted and get them to click. If social media capabilities do this, the new effort will be a success. But, there's little reason to think that this will make a meaningful difference. After all, Gmail has a status feature (like Facebook, LinkedIn and Twitter), and that hasn't kept the social media players at bay.
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