Bloomberg interviews Apple analyst Gene Munster from Piper Jaffay who thinks that Facebook has already won the social space
I don’t put a lot of faith in Munster’s comments but he said it: Google (GOOG) has given up on Social. He says Google has ceded the Social crown to Facebook and is back at work making its Search better.
I think Munster might have a bit of a tunnel vision when it comes to Social. One wouldn’t have much trouble arguing that YouTube is one of the bigger social sites on the net. Also Google Buzz has been integrated into Google Reader RSS pretty nicely (though it had a rough start and people seem to think RSS is dying). Orkut, Google’s direct Facebook competitor, might be dead in the water but rumors and sightings of a new social bar are popping up. I think Social is already too big a part of Google’s experience to just “give up on”.
He also says Google is Microsoft (MSFT) and Facebook is Google five years ago and getting tech superstars is much harder for Google. That’s a bit easier to swallow. Google’s growth has definitely slowed and they can’t offer lucrative stock options like Facebook has. Some of Munster’s other comments, below:
On Facebook’s competitors:
“Apple has Ping, which is basically a social network, but it really doesn’t
compete with Facebook. Google is worried about Facebook because what
Facebook has showed is that finding information is more social-based, and
less machine-based, and as people trust friends more than machines, you’re
going to see ad dollars shifting from Google over to Facebook.”
On if Google can catch up with Facebook:
There really isn’t, and at the end of the day, Google has given up on
social. They have a product called Buzz that basically failed a couple of
months ago. They have some other initiatives called Google Me and Google
Now, but the reality is that they can’t recreate the social graph that’s
basically won by Facebook. As Facebook gets more sophisticated in terms of
guessing what its users want, which is probably about 600 million people
right now compared to a billion people on Google, that gap is closing very
quickly. I think you’re going to continue to see those ad dollars shift and
unfortunately, Google just can’t do anything. They’re not going to create a
social network that is going to steal people from Facebook.
On where Google will find growth:
The reality is that they’re still going to try to somehow tie into the
social grid, as I mentioned this Google Me or Google Now, some of these
other initiatives. But I think what they’re going to try to do is to
continue to improve search and again, I think the unfortunate reality and
the reason why Facebook has this seemingly outrageous valuation, is that
this is simply where ad dollars are going to go in the future and that’s how
investors are seeing this. As the social graph gets better at predicting
what people want, advertisers are going to flock to these platforms, and
unfortunately it’s just a very difficult place for Google to be in longer
term. If you just take a higher level approach to this and talk to people
in the Valley, Facebook really is Google five years ago. It’s the place
where all the rock stars want to work. Google just really isn’t innovating
as fast as it used to be. It’s turning into more of Microsoft and that’s
just the law of the reality of becoming a big company with 23,000 employees.
On how much longer Google has to monetize ad revenue:
The gap is closing every day. You’re seeing Google growing at about 22%
this year and you’re seeing Facebook growing at about 100%. So I think the
reality is that if you fast forward five years from now, who is going to
have more revenue–Google or Facebook–it’s probably going to be Google.
But if you’re just going to fast forward and look at the growth rates for
the next five years between the two companies, clearly the advantage is to
Facebook for all of those reasons that we’re talking about. The core issue
here is how people are buying things is changing and advertisers need to
change how they spend their dollars to really target those people.
On how much of a competitive disadvantage it is for other private companies
that Facebook can raise money and still remain private:
It’s a nice advantage–I wouldn’t say it’s a huge advantage to Facebook to
keep some of these financials. I think the reality is that the big
companies that compete with Facebook know very well what’s going on
inside–they don’t need to listen to an earnings conference call to glean
insight. It’s nice just for the logistics of running a private company.
It’s much more efficient than running a public company. From that
perspective it’s a benefit to Facebook, but the reality is that Google and
Yahoo! know very well what’s going on because those employees are jumping
ship quickly from Google and Yahoo! over to Facebook and I think there is
some backchannels to those other companies.
On how much Google and Yahoo! have to be worried about top talent:
They’re definitely losing talent. As I mentioned the place rock stars want
to work now is Facebook. I think that there’s no way to replace that. This
has the same feel as Google did five years ago. The reality is that it
comes down to simple growth as we talked about–Google growing 22%, Facebook
growing 100%. People want to work with the best, the fastest growing
companies that are most innovative. One thing that I’m most impressed by on
researching Facebook is just the urgency the company still has despite their
success–they have 1,700 to 2,000 employees–somewhere in that range.
Google as I said has 23,000. It’s David vs. Goliath, but David is extremely
motivated here. I’m most inspired by that passion and urgency they have
despite the fact that they’re bringing in top talent that have already
proven themselves. These people still want to change the world.