Why Google+ Will Take Half of the Social Networking Market from Facebook (or “There Calacanis Goes Again”)

By Jason Calacanis

A year and a half ago, while hosting an unsanctioned -- but very lucrative -- poker game at the TED conference in Long Beach, I wrote the worst prediction of my career.

In a blog post titled “Google Buzz is brilliant, Facebook just lost half its value,” I gushed over BUZZ, Google’s very impressive second stab at social networking. Their first, Orkut, was a Friendster-like service that was serviceable, but not something folks would consider wildly innovative.

BUZZ was wildly innovative because, like the recently funded Color social network, it created what I’ve dubbed the “implied social network” (ISN) from your most emailed users. This was a brilliant, but dangerous, gamble. Your contact list is a great place to start building a social network -- except in the event that you’ve been in a flame war with your abusive ex-husband.

Color is building an ISN based on proximity, e.g., you took a photo at Madison Square Garden and Gramercy Tavern just like I did, so we must have something in common (in this case we both like to drown our Orange and Blue sorrows in morels, foie gras and sweetbreads). My interview with Color's founder here.

After gaining an impressive collection of vanguard users, including Leo Laporte and Robert Scoble, the buzz around BUZZ died down.

It was really odd: Google simply stopped innovating on the platform. We learned last week that Buzz development continued in the form of Google’s third major stab at social networking, Google+.

New entries into the consumer Internet market typically need some combination of the following in order to succeed:

a) a brilliant technical innovation
b) a brilliant business innovation
c) a bunch of little innovations around things like design, speed, community and quality

In the case of Facebook vs. Myspace, Facebook won based on amazing technological innovations in the form of the app platform. In fact, one entrepreneur on the app platform is responsible for half of Facebook’s success: Mark Pincus.

Without Mark’s innovations driving 20% to 35% of the traffic on Facebook (in my estimation), Facebook would be half the company it is today. In fact, don’t be surprised if Zynga is responsible -- even at this late date -- for 25% of the time spent on Facebook and a third of its earnings.  We will find out when Facebook files its IPO.

Zynga’s IPO filing shows $597.5M in revenue and $90.6M in earnings in 2010. If Facebook had around $2B in revenue and $250 million in earnings in 2010, and 99% of Zynga’s revenue comes from Facebook, the math says Zynga could be nearly a third of of FB’s top and bottom line.

This is strictly an educated guess, and we don’t know how much money Zynga paid to Facebook to get traffic. However, Zynga has long been rumored to be the largest advertiser on Facebook. We also know that Zynga is paying a whopping 30% of Facebook credits purchased to The Zuck.

Is it possible that Zynga is contributing $300M in Facebook credits and $200M in advertising back to Facebook? Do tell us what you know: :-)
Anyway, back to Google+.

While my BUZZ prediction was way off (thanks to Google freezing development!), I think my Google+ prediction will be spot on: Google+ will compete with Facebook as effectively as Android is competing with the iPhone.

Which is to say, Google+ and Facebook will, essentially, split the social market in half (+/- 15%).

Here are my top reasons why Google+ will be a crushing success.

1. Larry Page and Sergey Brin are using the product
When Larry Page took over as CEO, I sent him an email and told him that if Google was going to be taken seriously as a player in social, he needed to get a Twitter account and start using it.

Leadership starts at the top, and Google’s leadership is, finally, taking social seriously. Notoriously press-shy Larry (how many interviews has he done since taking over as CEO? oh yeah, zero) sharing kiteboarding photos speaks volumes. Sergey is also posting, interestingly, action shots (a sky-diving photo).   

2. Forced categorization of contacts
Google+ forces you, through an elegant user interface, to put your contacts into circles. When you update your profile (a.k.a. your Facebook newsfeed or Twitter stream), you are forced to select who you want to give this information to.

This throttles how quickly you can build your social network and how quickly you can share with it -- and that’s a good thing! Zuckerberg elected to build Facebook as fast as possible, and he believed people would never take the step to select which groups they wanted people to belong to, let alone which groups they would send to.

That decision, combined with the horrible treatment of a user’s privacy, has meant that many people simply do not trust Facebook. Google realizes this, and in a brilliant move the company has, as Dave Winer says, “zigged where they zagged.”

3. Google Hangouts is as good as Skype, and a lot more fun
Google Hangouts is a 10-person, video chat product that’s fun and free. You can hangout with your address book in seconds, it’s rock solid and -- did I mention -- completely free. I could certainly see myself using this product instead of firing up Skype.

4. Chrome Browser and Chrome Store integration
If you didn’t know, Chrome now has 20.7% of the browser market. That’s from a cold start with the beta launch in September 2008. Google also has an app store that competes with the iTunes store and charges 30% to developers for apps just like Apple. However, Google only charges 5% for in-app purchases, while Apple holds the line at a very unfair 30% for in App purchases.  

That’s how Google like to do it: take your competitors revenue stream -- be it Microsoft Office, Windows, Apple’s iOS or Apple’s in App purchases -- and make them free (or close to free).

Google gave Angry Birds away for free on Chrome starting on May 12. More than 1M folks downloaded it in the first 10 days. Boom.

Browser market share = power.

Facebook does not have a browser or an app store -- yet. You can be sure there are 50 developers somewhere on the Facebook campus working on one right now -- 100% sure.

5. Android integration
Let’s do some deep, deep analysis shall we?

a) Apple has a mobile operating system but no social network.
b) Facebook has a social network, but no mobile OS.
c) Microsoft has a mobile OS but no social network (arguably, Skype is a dormant one).
d) Google has a social network and an operating system.

Who’s going to have the best mobile social user experience?

If you answered D, you are correct.

6. The avant garde have left Facebook already
Last week I gave the opening keynote for the fabulous Future of Web Apps conference in Las Vegas. If you’ve never been to a Carsonified event, I highly recommend it, as it’s filled with people who actually build stuff (as opposed to CEOs like me who simply take credit for other people’s work).

During that keynote I asked how many folks used Facebook for photo-sharing. About 15% to 20% of the audience raised their hands. I asked how many folks used a new service like Instagram, Path or Twitter to share their photos, and 70% of the audience raised their hands.

I asked how many people were using Facebook more now than last year. Almost no one raised their hands.

The tech-savvy crowd has grown tired of Facebook and Facebook’s privacy games -- including the huge misstep of making facial recognition opt-out and not opt-in -- are starting to drive folks from the platform.  

Bottom line: if you own Facebook shares, I’d sell them at the $70B to $80B market cap you can get now and put that money into Google shares. I’m absolutely certain that $1 invested in Google (at a $167B market cap) will make it to $2 before $1 invested in Facebook (at $80B market cap) makes it to $2.

Google+ is another sign that Facebook has peaked.

#39: Debate is what scared people do instead of trying.

Reader Comments (22)

I would believe you more, if you had +1 buttons on this site! ; )

July 3, 2011 | Unregistered CommenterAlex @TWiST_Fanboy

Nice write-up. I agree with just about everything you said. It will be fun watching what happens.

July 3, 2011 | Unregistered CommenterJanet

Well, dosent Microsoft trying to build a social network out of MSN Live?

July 3, 2011 | Unregistered Commenterjd32303

I don't think so. Building social network with contacts is always limited. Facebook became successful with it's friendsuggestions and efficient social graph. This will stuck somewhere, mostly very soon!

July 3, 2011 | Unregistered CommenterSarat

@Jason, you may be right, but that 50-50 number will have to be accurate only when Google+ if eclipsing FB. I really don't think there is room for more than one dominant platform like FB. FB is so popular because it is so popular.

I don't have kids, but I have heard that the yoots have quit using FB. If that is true, then it is just a place for old fogies like myself to connect. But then, wouldn't that stratification make it easier for marketers to target us?

If Google+ really does take off, I worry that it will make it just that much harder to either get into Social Media (as a business) or to expand upon it since business will lose focus with so many platforms around.

BTW, I was thinking about this weekend and I think that they really, really blew a good thing when they erected their paywall to get any of the usable features. They were getting really big, waaaaaay before FB hit the scene, but as soon as they started charging $49.95/yr, I dropped them like my CompuServe subscription when the Internet hit.


July 3, 2011 | Unregistered CommenterRandyS

Mark Pincus are you serious. You are promoting him? He only cares about himself. End of story. Have you done any research into who you are saying is great?
If not here is another video.. calling people dumb.

google's 2nd stab... what about Google wave? Did you forget about that one?
google only steals/borrows stuff from other people/companies, they cannot think for themselves.
google images, copies bing images, android copies Apple iphone.
google buzz.... um copies twitter. I could go on.

Oh my god son. you have lost your mind. I sent google proposals over 2+ years ago right before google wave.... oh yes you forgot about that one. It outlined some of the stuff that is in google+.
Did they borrow some of my ideas. Looks like from my perspective.

Google do no evil.. what happened to that mantra? Read this article from TechCrunch

If you are going to blog, then please do your research.

Lance Damon Bliss

July 3, 2011 | Unregistered Commenter7slocal

For me and many others, Facebook has blown it. I want to be the steward of my own data. I want greater, easier, more granular control over with whom I associate or communicate online. Unless G+ has an epic fumble, they've got my eyeballs.

Even if G+ goes belly-up tomorrow, I'm still done with Facebook. If G+ doesn't grab a huge marketshare, it's shown the NEXT Zuckerberg how to build a social network without forcing "privacy is no longer a social norm" down users' throats. Facebook's days are numbered, IMO. Google has successfully exploited Facebook's weaknesses in such a way that I think everyone is kind of facepalming and saying, "Of COURSE! Why didn't I think of that?"

July 3, 2011 | Unregistered CommenterMatt DeBoard

A fundamental flaw in your logic is that an email contact list equals a social contact list. For the "avant garde" you mentioned this may be true, but for the vast majority of people who use social networks, this is not the case. Assuming that Google+ will take large chunks of market share simply because it's a better mousetrap for organizing social networks around email contact lists seems like a stretch. I do agree that Google+ will attract the technical savvy and social media elite, but again that's a small % of the people who will make the transition. While the process of migrating to Google+ may be IOFB (intuitively obvious from birth) for the tech savvy crowd, the vast majority are not going to set up a Google account and profile, and then hope their community of friends follows them.

Second flaw is assuming that just because Larry and Sergey use the product that masses of people will make the switch. Google is an engineering company, led by guys who thought it was cool to bid nonsensical mathematical constants for Nortel's patents - and got their butts kicked in the process. Not exactly the leadership that inspires confidence in their ability to set a real strategy in the social space. Maybe their strategy was just to bid up the price on the patents and have a good laugh along the way. But in the end, they've got the potential for lots more infringement suits down the road. But back to the social space. Google simply lacks true vision in this space, and while Andy Hertzfeld is a pretty innovative guy, I don't think he alone is enough to create disruption in the social networking market.

Granted, browser market share does equal power to some degree, but I think it's irrelevant in this case. I doubt people are going to migrate to Chrome just to get an extra goody or two in Google+. And there are aleady Chrome-based solutions hitting the market (e.g. Rockmelt) that integrate pretty nicely with Facebook and will probably do the same with Google+.

Your answer "D" above is also flawed. You assume that Google HAS a social network. It has its 3rd (or 4th, depending on how you count) foray into social networking. They are a long way from critical mass.

Google+ Hangouts is definitely cool and will put a dent in Microsoft/Skype. On that front I do give Goggle a chunk of credit. They are innovative. But on the same front, they've got to do a better job of getting stuff out of "beta"...

One might assume from reading this reply that I am a huge Facebook fanboy. Not the case. Like many others there are a lot of things about them that irritate me. They've got a boatload of problems to deal with, and Google+ is now another one. But I just don't see Google+ taking half of Facebook's market share.

July 3, 2011 | Unregistered CommenterRobert Keahey

@ Robert Keahey: You haven't actually used G+, have you? I've been using it for a few days, and Google has definitely flexed some design muscle with G+. It's good. And strong. And definitely a contender to take a huge chunk out of FB's market share.

July 3, 2011 | Unregistered CommenterMatt DeBoard

@Matt DeBoard - you are correct. I haven't used G+ yet. Put in my early adopter bid, but guess I'm not part of the avant garde!

I'm not saying that G+ doesn't have good stuff. As I said, Google is very innovative. Both Circles and Hangouts look really cool.

I just don't see them taking half of FB's market share. A chunk as you put it maybe, but not half. They've just got to pull together and the execute a solid strategy - something they've haven't done to date. Maybe G+ will surprise me.

July 3, 2011 | Unregistered CommenterRobert Keahey

I really thinks it will be android that will push google+ to really compete with facebook. Google already has more users than facebook with gmail, youtube and Android if it can get these users to use google+
for even some of the services it can really get a good start on it. Android is supposed to get 200-300mil users this year alone

July 3, 2011 | Unregistered CommenterDnkhatri

The truth is that none of our opinions matter. We are the geeks and nerds. We care a lot more about this kind of stuff.

I'll believe it when my Mom has a Google+ account. Personally, I don't like Facebook, but I still use it because it's the easiest way for me to reach a lot of people I know.

July 3, 2011 | Unregistered CommenterDavid Chu

OK, now where can +1 this?

July 4, 2011 | Unregistered CommenterWhere is the button?

@Robert: Agreeing with you on any point ;)

I've these discussions a lot since google launches g+ and everytime people are the same:

- Iphone/Mac-Fanboys think there is only one world iOs-Apple aka Stevies best work;)
- Android-Fanboys thought that "it's open-source and you can do everthing you want", hmm, really?
It's only a marketing game for people like above, who thought "hey man, i'm using google, gmail, docs etc. and now they have g+, it's great i used! It's cool, it's great, bla bla"

I used g+ some days a bit and i agree with google hangout, really good product, better than skype and circles is also interesting. But think about the world! About the kids around, are they all going to use g+ a social network where nobody of there friends are? Maybe in US, people want to go in but there are many, many people who don't want YASN (yet another social network).

You're comment is interesting, i agree with it g+, if google is not killing it after 1 or 2 years, it could be possible for getting 15-20% in US, only! And compared to the mass market this is only a small amount
=> Because:
- EU has a problem with Google since they grap every information about you(!)
- Russia / China like their own way : QQ, and so on...

And if you think about this, then g+ has to be a really long-term project (5+ years) to get 15-20% of the social network market, this means if facebook has 700 Million users today, perhaps in 2015 they have 1 billion => 15-20% means 150-200 Million users => I think 300 Million people are using gmail, this means if gmail is growing to 400 Million in 2015 that 50% of every gmail user is using g+. This is not possible within 1-2 years, be realistic not a kid. Your thoughts are only possible if we think of 2015-2020 and not 2012/2013...

And like all of as, geeks & nerds, think about your whole family who wants another mail account, YASN ?

Another point:
- Not every product kills or competes really good, like WhatsApp. Everybody uses WhatsApp, now do any iOs User wants iMessenger? Only for iOs?

Competition is good, but IT-Competition deals only with innovation, not in technology much more in selling this tech to consumer....

July 4, 2011 | Unregistered CommenterFe.To.

@Fe.To. @Robert

Google has many many email and youtube users, among users of their other products. Once G+ launches publicly, I think it'll be a short stretch to imagine that every single user of any google product will be one click away from interacting with G+. A shift of Social network is not going to happen in a short timeframe. Do you think people switched to Facebook overnight or even in 6 months? NO! However, with the social layer integrated into all google products, it's going to get harder and harder to ignore Google + as time goes on... Even now, people who dont' have google + accounts are getting notifications from those who do...

It'll be harder to ignore that little red button on your email bar once people start sharing things, and you have a google + account. Believe me.

July 4, 2011 | Unregistered CommenterSusheel Chandradhas

The Chrome Web Store charges 5% for all sales, in-app or outright purchase. Android Market is the one that charges 30%.

July 4, 2011 | Unregistered CommenterJames Williams

I found recently that my Facebook usage has tailed off, mainly due to the extra work required to maintain different privacy levels for different lists. What Google + can't currently do is allow people to follow or interact with a commercial entity in the way that Facebook pages allows. To me thats a crucial feature and once companies become visible in using Google + it will start to get real traction.

July 4, 2011 | Unregistered CommenterGordon

As i mentioned before, the question is "will it be hard to ignore?".... i hope we get a bit more competition in this area because i'm not the one who likes companies acting like monopoles...

And this is maybe the point: - it's interesting the see what facebook is doing here, competition everytime is the best thing for customers

like this:

July 4, 2011 | Unregistered CommenterFe.To.

I for one don't want a social network built upon my email contacts. In my world, email is for business - social is I have hundreds of FB "friends" whose email address I don't know, nor care to know. I'm on G+ and so far I like it. But if they want critical mass then they need to connect me with my "social" friends and today that means...Facebook. Not email. Never email. Isn't that why Buzz bombed? FB understands how to connect me to the people with whom I want to be connected. So far, G+ just recommends folks from my Gmail account. Sorry, not going to work.

And speaking of Color - the author fails to mention what a BUST Color has turned out to be. A $41Million joke, nothing more than a marketing campaign whose buzz peaked and died 2 months ago. We'll see if G+ does well - and if it does it won't be for the reasons this author puts forth. Isn't he the guy who lied about the first iPad having a camera? Does anyone take this guy seriously anymore anyway?

July 4, 2011 | Unregistered CommenterReservoir_Dan

With respect to all opinions some of which are great and the author of this so emotional article, I would like to suggest to members to view things more 3D :).

In very short time we will witness first appearing of "Virtual Identities" in the cloud. So which platform you use for you pictures, statuses, notes, docs, mails, contacts and whatever your digital life or company is using will be just irrelevant! I can have profile on FB and you can have one on G+ and my grandma can have one on 60+, we(the ordinary users) shall feel like its all one platform and content shall be stored in the cloud and be property ONLY OF OUR OWN!

You wrote the proof of it as a principle in its early stage. You mentioned that G+ makes you divide in groups your whole network, well this is just the first step of all this - the semantics. Maybe it is the Web3.0, whatever it is, it starts from the social field and social interaction. FB made a successful platform as an example of it and indeed an example of cybernetic network (agent surfs through content without living its virtual boundaries.vs. Internet itself as it began is a network of physically connected storages of content)
In this order of thought, you did not mention anything about the publishing skills of G+. Big flaw. Social networks are all about socially produced content!

The most important to have in mind is that each day there are at least 100 social networks coming out, which people do prefer before FB and will prefer to G+ (Not counting those users that have a dozen of social profiles on dozen of platforms like us here :). This was expected even before FB came to the scene and filled up the vacuum. The time when the vacuum will be filled with segmented social networks is coming and if gugle wanna play there they should start talking about AI, instead of copying and dumping. What in some cases has proven to be good for users. Anyway they are just playing their cards right :D

So not to beg more food for thought :) I would say that
The social network game wars are over, alhough it looks like we have new players ! So title like 50% of FB users are pure speculation (even if you missed "in 10 years":) or is just on of those PRs. You tell us the truth!

PS. I dont like FB, it is anoyingly bugy.
PS2. I do like G for its simplicity and stability in general.

July 4, 2011 | Unregistered Commenteryellowpages

Will we ever get to the point where social media platforms are federated into a clearinghouse? This way we could choose the UI platform we like best (could be G+, could be FB, or could be something that I invent next year.) If I posted on my 'board', the feed goes to the combiner where it intermingles with FB and shows up on my friend's FB wall.

What would be the benefit of this to a FB or Google? If you subscribe to the theory that most platforms are fads, then they would gain longevity, well past their expected expiration date.

What would be the benefit to a competing platform? Better control over the user experience, targeted ad revenue (perhaps) or if the members pay for the service, maybe no ads at all.

Much the same as me calling from my PC on Skype and connecting to a landline with PacBell in San Diego, or to a Verizon cell phone, each carrier makes their own money, but the ecosystem depends upon total participation by all platforms (carriers) to reach ubiquity.

Like the AT&T of old, Facebook will have to be dragged kicking and screaming into this sort of model, but in the end, it seems to make the most sense (even for them), otherwise we all end up in small 'tribes' of platforms that do not interconnect.

Doesn't this sound like rural life ca 1911?

July 4, 2011 | Unregistered CommenterRandyS

>>Will we ever get to the point where social media platforms are federated into a clearinghouse?
There is no other way!
.. and what do you think is all those apps that makes you able to login almost everywhere with your FB or G account?
That is its embryo! .. and maybe the best thing ever in internet ... since openID failed!
Infact they are playing the clearing house now, but not for long. Open standards and the Open Approach will and already are changing the world.

>> What is the benefit for .. bla bla
Its a public benefit, social benefit .. etc. Its like asking in 1911 where is the benefit of Mr. Torvalds! I think the answer is obvious.

Just a visionary speculation: What if everybody has their social profile on their phone, and all phones form the cloud. Structure of profile is flexible but still reflects open standards. Data is cached in the cloud but never owned by any platform. This is doable now and maybe shall be the reality tomorrow.

July 6, 2011 | Unregistered Commentercompany

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