In the beginning was the personal computer.
Not long after, people started connecting them together on networks, culminating in the World Wide Web and the Web browser, which launched the first great era of the Web. Then came the search engine, which launched the second great era of the Web, the era of Google.
Now comes the third: the era of social networks. Facebook has jumped out to a commanding lead, but Google hasn’t really started fighting yet. So the stage is set for a battle of, well, biblical proportions. The wizards at the Googleplex in Mountain View, Calif., are working furiously on a social network to rival Facebook’s. Just a few miles away, in Palo Alto, Facebook is preparing for an initial public offering to give it the money it needs to take on Google’s Goliath. And last month, the clash got a bit ugly when it was revealed that Facebook had hired a public relations agency to slime Google’s social networking tactics.
We are about to witness the next great conflict of the information age, a rich and complicated match on the scale of mainframes vs. micros, RISC vs. CISC, Windows vs. Unix. Like those battles, Google-Facebook will shape the industry’s landscape for years to come.
The Web has had a social dimension almost from the start. It just took a while for the right software to come along and make it compelling. "We’re now seeing a Web built around people, where their profiles and content are moving with them as they visit different websites," notes Paul Adams, who made his mark as a user-experience researcher at Google before jumping recently to Facebook. Socializing is something that people used to do on the Web; gradually it is becoming the Web.
During the first quarter of 2011, the set of 12 social media companies tracked by the Rye Brook, N.Y.–based private equity advisor NYPPEX rose in value by 51 percent. One of those companies, the Facebook game maker Zynga, increased by 81 percent. Ken Rutkowski, the founder of the Media, Entertainment and Technology Alliance, predicts that credits purchased and exchanged in its online games will make Facebook the world’s biggest "bank" by 2015.
None of that has been lost on Google. Yes, it flopped with Buzz, Orkut, and Wave. But Google finds itself in a position like that of IBM in the early 1980s, when IBM’s core mainframe business was threatened by what were then called microcomputers. Like IBM 30 years ago, Google has seemingly inexhaustible resources and an implacable determination to stay on top. And so it will try again in the social sphere, and keep trying until it succeeds.
How serious is Google about social media? In April, its new CEO Larry Page announced that a quarter of all bonuses would be tied to Google’s social media success.
Yet Google’s opening salvo, on 31 March, was so small that it slipped by with little fanfare. Still chastened by the Buzz fiasco, apparently, Google is calling its modest new initiative an "experiment" for now. Officially known as "+1," it’s a button that pops up next to search results and ads. You click on the button to recommend pages or ads to your friends and contacts. Yes, it’s basically the Facebook "like" button but without all the other stuff you need to call yourself a social network. But Google’s not done. Think of +1 as an acorn. The oak tree will come later, when Google thinks we’re ready for it.
In the meantime, Google says that it will use the button to help determine a page’s relevance and ranking in its search results—the more +1 clicks a page gets, the more significant and interesting Google’s servers will deem the page to be. There’s a kind of insidious brilliance about +1, because every time you hit that button Google learns a little bit more about you, letting the company target you a bit more effectively with search results. And with ads, too.
That’s important, because ads are what makes this cockeyed caravan go. Google and Facebook have the same basic model: Offer the services free and charge for advertising. And, as any adman will tell you, the more popular your service, the more money you can get for ad space. That’s why Google and Facebook are vying to be the de facto home for Web users.
Nearly all of Google’s and Facebook’s revenues come from advertising. Google posted US $29.3 billion in revenue in 2010. A recent report said that privately held Facebook generated about $2 billion in revenue last year, which places its size on a par with that of Google when Google was also just six years old.
What Google and Facebook have that old media don’t is information about you—data that they collect and process with a barrage of advanced technologies, software, and math to wring money out of you with far greater efficiency. They do that by using the information to target you with ads that can be so specific and relentless that they seem a little creepy at times. Use Google’s Chrome browser to search for a fruit-flavored green tea and you will probably find yourself hounded for days or weeks by ads from tea sellers that pop up to the side of other pages that Google points you to. Writing the code that does that is how some of the greatest mathematical minds of the current generation make their living these days.
That’s Google’s edge: It is in the enviable position of benefiting from having users online in almost every way (but it greatly prefers to keep them at sites available to its scrutiny through the Chrome browser and Android apps). Facebook, on the other hand, can learn about people and profit from them only when they’re on the site (a fact that helps explain Mark Zuckerberg’s fervent desire that we all just get over our archaic notions about privacy). So now Facebook’s triumph is emboldening the network to take on more and more services in the interest of keeping users within its walls.