Google Investors Starting to Fear Facebook

Google’s costs are up- way up. The past year they’ve been spending like mad to keep employees and to keep their market share, but they still missed their earning projections. All in all, that doesn’t equate to good news for their shareholders. As of the posting of this article the search engine was down 6% in mid morning trading.

If you’re a regular reader of our blog, then you know that we don’t think Google is handling its approach to social networking and social search with any sort of grace or viable strategy. We’ve actually accused Google of being the Microsoft Zune to the Apple iPod (Facebook). If anyone knows anything about music players you’ll know that this comparison is not a good thing.

And investors have a right to be worry. Google has offered poorly conceived blunders (Buzz) and poorly disguised copies (+1), to Facebook. And as they ‘develop’ these things, Facebook continues to increase its advertising network and its social search functionality. We know that Google’s advertising network is going to be effected, because we hear so many of our web design clients asking about social media advertising even before they begin to consider search engine optimization (SEO). That’s a big deal- Google has slightly less then 70% of market share in search engine use, but that number has been very slowly been challenged by the Bing/Yahoo team. And now Facebook, one of the largest user databases in history has successfully closed off Google’s access to its client base while leveraging search advertising internally.

Those $500.00+ Google share prices are square in the sights of Facebook, and if Larry Page can’t restore the product quality and innovation to the company, then it will be the next Microsoft, struggling to find a new identity in a post PC (search engine) world.

And herein lies the crux of the issue. When you get too big, you make the mistake of putting your investors’ desires out in front of your product quality and end user experience. Essentially Google has placed its weakest, most skittish supporters at the front of its battle lines. At any sign of competition, those skittish supports flee, making headlines and questions marks arise for everyone else. Its the trickle down theory of publicity. Scared investors make headlines, end users read headlines, begin to wonder if Google is really the best source to turn to for search. An image to document this theory more articulately:

Google's mistakes cause investors to flee
Terror in the ranks! Runaway Redcoats!

The problem is that now Google is already perceived as losing. Perceptions can damage a business when they depend on expectation and confidence to finance their ventures and their efforts. Having this fearfulness undermines CEO Larry Page and does give strength to Facebook. Google now has to not only find a way to get a head, it also has to find a way to renew confidence. And that requires some sort of major product success, which so far they have been unable to deliver.

Do I think Facebook is really any better than Google for marketing or advertising? No. Do I think that the end user comes out ahead? No.

Both are notorious for trying to force end users into specific behavior patterns that strengthen the company, rather then the experience. Both are huge violators of privacy rights and have made decisions that cause me to question the moral compass at their helm. Both have stifled innovation and invention in the interest of trying to preserve themselves. In the end, I don’t know that we, web designers, search users, social network users, are going to come out ahead regardless of who ends up winning.

I write these posts to publicize the events, add insight as to what this might mean for my clients here in Los Angeles, and maybe contribute to a better outcome, where these two giants of social media and search engine marketing focus on creating rather then competing.

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