Facebook and Google: Who should worry?

Microsoft has invested $240-million in Facebook, resulting in a $15-billion evaluation for the social network. I fear that this might be the beginning of the end of the Facebook mania.

Personally, I would have preferred to see an investment by Google. It is a company I admire, and one that I trust to have a clear path and vision for its future, and thereby the future of my online experience. If Google was now sitting with a stake in Facebook, I would be more relaxed. There are clear ways in which the two companies can work well together, and the evaluation, although still nonsensical, would make a little more sense.

As it is, we have now pitted the two against each other, and the question floating on the web for the past two days is whether Google should be worried.

Why should Google be worried? What can pose a threat to the company? A decreased amount of eye time on its products, definitely. No matter what applications Google develops or acquires, its core business can be summarised in one word: advertising. The search is simply the means to the end. In order for the advertising model to work, it has to benefit, of course, the advertiser. And in order for that to work, the customer must be able to interact with the advertiser in a manner that is convenient and applicable.

Best way to do that? Offer adverts for products for which people are searching. Hence the presence of “contextual” ads on Google’s search results.

Anything else, by the way, is counterintuitive. If you click on an ad while browsing a site, that site has lost your attention. Imagine SABC3 running an ad that convinces you to switch channels and watch M-Net now.

Nevertheless, this counterintuitive model is admittedly rampant and successful, which I guess is good news for Facebook since so far it is the only business model it has.

But it is not a problem for Google, because Facebook acts as a driver to Google’s other products, anyway. Here are some ways how:

1. Google cleverly identified video as a great viral marketing tool. Its stake in YouTube, and plans to embed ads in the video clips, means that the more YouTube clips you share on Facebook, the more Google ads will be shown. For free.
2. Facebook allows the importing of “notes”. If you were to visit my Facebook profile, you would see an excerpt of this blog post as soon as it is posted. If you want to read the full post, you will be redirected to the Thought Leader site. Admittedly, Thought Leader does not host Google ads, but lots of other blogs do, and the extra traffic that Facebook brings to these blogs benefits Google directly. And remember, these ads are now contextual. By clicking on a note, you are showing interest in the subject covered in the note. And Google knows how to capitalise on that rather well.
3. A multitude of third-party applications drive traffic away from Facebook to more sites that host contextual ads. For example, an application can list the main headlines from a news site. Facebook does not host these stories — the news site, with its own advertising, does.
4. For good measure, Google released its own Facebook app that lists headline news stories as requested by you, or recommended by your friends. You can track any topic you like (eg “rugby”). I’ll leave it to you to guess what happens when you click on the link.

In addition, Google already has marketing relationships with 20 other social networks. Facebook and Microsoft have to run fast to keep up. They would have to move at supersonic speeds to get ahead.

But here is why Facebook should be worried. Now that it is official that Google will not have a stake in Facebook, it is free to push its own social network, Orkut. It has already had great results with this in countries like Brazil, and it will probably now up its game a notch.

I have previously argued that people are not going to migrate from Facebook because of the time and effort it would take to replicate the network elsewhere, but who knows what exciting gimmicks Google might throw our way? Although, Sergey Brin, Google’s co-founder said yesterday that “We don’t feel at a higher level that we need to own everything successful on the internet.”

But actions speak louder than words.