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Google of Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) has long dominated online search, indexed million of books, mapped out much of the world and even developed driverless cars. But for all that success, the company just cannot seem to crack social.
Google has a rather long list of social media also-rans, including Orkut, Reader, Wave, and more recently, Buzz, the ill-fated Gmail-based social network that imploded following a catastrophic user policy violation and a class action lawsuit.
It's an open secret that Google's sole surviving social media platform, Google Plus, has failed to gain any meaningful traction despite the company's best efforts. Now Google Plus is on life support.
GOOGL has continued to diminish attention to the social media platform while simultaneously enhancing services such as YouTube.
Last year, Google took the bold step of separating Google Plus profiles from its more popular services, including YouTube. Now Google has announced that Google Plus will stop supporting Hangouts On Air as of Sept. 12 with the broadcast service continuing to exist under YouTube Live.
In effect, Google is completely giving up on pitching Google+ as a social media platform.
Google Plus Was Doomed to Fail
It appears that Google Plus, one of Alphabet's most epic and expensive failures, was doomed to fail from the get-go. First off, although Google developed the platform in 2010 as a matter of necessity, it did so from a wrong mindset. Google developed Google Plus primarily to serve its need for user data and as a Facebook Inc (NASDAQ: FB ) competitor.
GOOGL was actually scared that FB was going to eat its lunch and desperately needed to stem the threat. In 2011, Facebook was still a private company valued around $50 billion , much smaller than Google's own market capitalization of about GOOG)/Data/Market_Capitalization/2011/Q1" rel="nofollow">$200 billion . But Facebook had something Google coveted: a rich cache of data from more than 500 million users. All the while Facebook was busy poaching key Google executives.
Alphabet Inc did little to differentiate Google Plus from existing social media sites, and the result was that the platform ended up looking little more than a Facebook clone. The company did outthink Facebook on some aspects, notably Circles, a feature that allows users to better customize the privacy of what they share. But FB was no slouch in the "me-too" game either, and soon introduced a similar feature.
In the end, there was little reason for people to switch from FB to Google Plus.
Additionally, Google's playbook of tying Gmail, Google Drive and a host of apps to Google Plus did not go down well with most users. People still remembered the Buzz fallout, and many were jittery about letting Google use their personal data to tailor its ads.
Research firm Edward Morbius estimated in that even though as many as 2.2 billion people own a Google Plus account, only 4 to 6 million actively use its social media aspect.
Google's struggles with Google Plus and social media in general aptly demonstrate the sheer difficulty of a large and well-established company trying to catch up with more nimble upstarts.
Google has tried everything in its power to make Google Plus a success, including tying employee bonuses to success by the platform, but nothing seems to work.
But maybe that's not such a bad thing.
Google Plus' Death Is Good for the Bottom Line
The interesting part about the failure of Google Plus is that it has actually forced Alphabet Inc to focus more on its core strength of selling display ads. It's becoming clearer that Google was simply being paranoid about Facebook killing it.
During the last quarter, Google recorded revenue of $17.7 billion, up 21% compared to a year ago, compared to Facebook's $6.4 billion after growing 59% year over year. In real dollar terms, Google added $3.1 billion to its top line, considerably more than Facebook's $2.4 billion.
What's remarkable about Google's growth is that it's accelerating - the company posted top line growth of 11% during last year's comparable quarter. This appears consistent with a recent RBC survey of online marketers that found that Google ads still give the best bang for buck amongst all online ad platforms.
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Google can now use the huge sums of money it has been pumping into its social efforts to develop more promising services such as YouTube and Google Play.
With YouTube and Google Play slated to contribute nearly a quarter of Google's revenue by 2020, the online giant will do well to focus there and stop throwing good money at bad investments.
As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
