Is Facebook A Threat To Google ?

A report in the Huffinghton Post on August 10, 2010 revealed that Facebook CEO Mark Zukerberg had ordered a lockdownof the company in order to strategize and contain the aftermath of the expected launch of a rival social networking site from Google. In what seemed to be a reaction to that development Google CEO Eric Schmidt in an interview he gave to the Wall Street Journal on September 24 2010, dismissed any notions that Facebook was an immediate threat to Mountain View. Mr. Schmidt suggested that the company's immediate threat was Microsoft Bing and that it was too early to tell how strong a competitor Facebook would be.

Evidently, Eric Schmidt seems to think that Facebook is not an immediate threat to Google but there is some evidence to the contrary. A report in the widely respected technology blog Techcrunch revealed on September 1,2010 that many Google employees are leaving the company and some have gone to Facebook. Some of the most prominent employees to have left the company include Omar Hamoui, the founder of AdMob; Lars Rasmussen, who along with three others developed Google map and wave left to team up with Facebook in November 2010.

The exit of some of Google's best engineers to Facebook is a threat that may have motivated Mountain View to announce on Friday November 10 2010 a 10% pay increase for all staff while senior Executives received a 30% pay raise.

These recent personnel movements suggests that Facebook is proving to be a formidable internet company that has witnessed astonishing growth. However, there have been several comparisons or suggestions as to how Facebook will become a viable alternative to Google or become more powerful than Google. Evidently, Google just like other internet properties like Myspace and Yahoo are seeking to challenge the dominance of Facebook in the social networking space. Google however has huge resources and continues to make acquisitions at a pace that is designed to dominate any segment they play in.

Google especially sees Facebook as a threat because its huge user base of 500 million could well double in five years using the last five years as a yardstick. Obviouslywith more users Facebookbecomes more powerful; takes in more revenue; generates more traffic and takes market share from Google. Technology analysts have noted that when it comes to competition Google takes on all comers. For example, Google outbid Viacom to buy Youtube for $1 billion; Google outbid Apple to buy Admob for $750 million; Google outplayed Microsoft and tied up with Yahoo Japan; Google acquired ITA for $750 million a company that that provides travel information to visitors on the web.

In addition, Google's acquisition of Android in 2005 has positioned it as a one of the leaders in the smart phone market today. The wide adoption of Android will ensure that Google will likely continue to dominate search on the mobile space. There is no doubt that Google is seeking to become a key player in the social networking space. This is why Google launched Buzz and as Facebook threatens to unseat Google as the most visited website in the world, Google is set to launch a challenge to keep its number one position.

It is clear that by developing a social networking platform based on the idea of integrating various aspects of Google social networking elements into one platform Google is pursuing what Marketing strategists regard as a master brand strategy. A master brand strategy suggests that Google is building most of its other offerings or sub brand names under the master brand name -Google. Evidently, from a Marketing perspective all Google products that are developed and carry the Google brand name benefit from the strong brand equity of the main brand and therefore would likely enjoy a positive Market off-take.

Clearly, Google is seeking to enhance its social networkingofferings because it seems that Facebook would soon overtake the technology giant as the mostdominant site on the web. As a result, Google has renewed interest in building a formidable social networking platform designed to beat back the challenge posed by Facebook. Facebook is also aligned with Microsoft -a company seeking to dethrone Google as the search king on the web.

In addition, Google could be jittery because Facebook contains a huge human database that could provide a search platform that is human driven as opposed to Google's robot centered algorithmic search.

Obviously, the growth of a human driven search platform could reduce the relevance of Google's robot based algorithmic search. In addition, the emergence of iAd advertising and search platform being developed by Apple and the growth in the use of Apps, which Facebook has benefited from, could mean that the browser based search on which Google built its platform may loose relevance and diminish Google's influence as the search king and biggest internet company.

As Facebook's revenue is set to reach an estimated $1.2 billion dollars and as the company currently controls 17%, display of advertising on the internet, which is higher that Google's 6%. Facebook's dominance of display advertising is a good reason for Google to be worried. Also the fact that 96% of Google's revenue comes from search makes it very vulnerable to serious contenders trying to take away its leadership in search.

On the surface however, Facebook is not really a match for Google. For example of the top ten sites in the world based on Alexa traffic rank three of them are sites owned by Google: Google, Youtube & Blogger. The top ten sites listed in order of their rank are: Google, Facebook, Youtube, Yahoo, Windows Live, Baidu, Wikipedia, Blogger, QQ.com, and Twitter. Also other global Google sites feature prominently in the top twenty.

Furthermore, Google has far more internet properties than Facebook. For example, Google has Gmail, Buzz, Orkut, Google Map, Google Earth, Google Books, Web Search and More. Google has also developed applications like web browser- chrome and netbook operating system and the very successful Android Operating system.

In addition, Google has a Market capitalization of about $156 billion dollars, which is six times higher than Facebook has projected market capitalization or valuation of $25 billion dollars. Interestingly Google's annual revenue is $25 billion dollars while that of Facebook is approximately $1.2 billion.Technology analysts believe that Facebook has an uphill task in its bid to unseat Google as the number one web company by revenue but could unseat Google as the most visited site in the world.