It feels like just a few years ago that Google held an an unassailable competitive advantage with its AdSense system. It is unquestionably the most successful online advertising system and has enabled Google to reap tremendous value. Coupled with its proprietary PageRank system, the two components were and still are the core of Google’s business DNA.
But a new and arguably simpler way of targeting ads using the social graph based your personal connections is proving to be more effective. Facebook has not only taken over Google’s lead in visitor traffic, but has very quickly become fertile ground for advertisers to reach switched on prospects. In addition, they’ve been able to undercut other sites’ CPMs, going as low as $0.60 (compared with $2.50-$10 for competitors) making it even more attractive from an advertiser’s perspective.Google has been caught flat-footed in the social marketing space. Not only have they been unable to launch — and maintain — a social network, they seem to have adopted a build it and they will come approach to social computing. Their previous attempts (Orkut, Dodgeball, Jaiku, Wave, Buzz, Aardvark, etc.) have all fallen spectacularly short for myriad reasons. The one thing these failures have in common is a lack of real innovative utility that people actually care about. They were all either developed or acquired as “me too” approaches that lacked a specific Google point of view that resonated with regular people. Their latest “+1” program looks to compete with Facebook “Like” button. Again, another me too approach that doesn’t significantly differentiate.
To help refocus the company, new CEO Larry Page announced that all Google employees’ bonuses would be directly linked to their success in social strategy. To some, this was a sign that Google has grown too big and lost its ability to deliver meaningful innovation. To me, it’s a carrot that they will be chasing for some time to come.
4/10/2011 Edit: Looks like Google’s Yelp competitor, Hotpot has just been rolled into Google Places. A -1 for Google.