San Francisco - Facebook finally has a serious competitor.
At least, that's what social media investor Sergio Monsalve thinks.
Venture capitalists such as Monsalve see early signs that
Google+, which has picked up more than 25 million users since launching in
June, is headed down the right path.
Google's infant social network, which counts Facebook CEO
Mark Zuckerberg a member, has met scepticism so far. Some are waiting to see if
it can maintain the rapid momentum of its first months.
Others see reason to be optimistic. Monsalve, who has
invested in various consumer internet startups, is among a group of VCs who see
If Larry Page's brainchild - which some say mimics better
than Facebook the instinctive categorising of friends that occurs in real life
- fulfils its early promise, it will come at a pivotal moment for its bigger
Facebook is widely expected to go public as early as 2011,
barring further market ructions. The emergence of a serious challenger when it
now has none will almost certainly give some investors pause, and maybe even
hurt its valuation.
"It's much richer, much more interesting pieces of
content" compared to what he typically sees on Facebook, says Monsalve,
who invested in recently-acquired MyYearbook.com and worked closely with
MySpace in its heyday when he headed marketing at Photobucket.
The stakes are high. Facebook should pull in advertising
revenue of $4.05bn this year, according to eMarketer. Rival research house
ComScore says its US users spend 434 minutes a month each on the site. It has
750 million users globally.
That makes each minute spent on Facebook today worth roughly
about 10 cents, excluding revenue earned from peripheral sources such as
third-party games or people buying Facebook credits.
And marketers are pouring more money into online advertising
overall; eMarketer says Facebook's take should grow to $5.74bn next year.
The question in the near future will be how much - if at all
- Google+ cannibalises time on Facebook.
"It's not like for every minute on Google+, you spend a
minute less on Facebook," says Lou Kerner, an analyst at Wedbush who owns
Facebook shares and likes various features in Google+, including that it is an
open network with much of its information available to anybody.
"You might even spend more" in a recommitment to
social networking in general, he argues.
What's to like?
Just two months after its launch, the impact of Google+ on
Facebook is hard to gauge. If a sense develops that Google+ keeps gaining
serious momentum, that's when it could hit Facebook's valuation, venture
Signs are emerging that Facebook's valuation on the
secondary market has peaked, although that may have less to do with Google+
than with the external environment. Interpublic Group of Cos reportedly sold
half its Facebook stake at a valuation of around $10bn to $12bn lower than
recent private market transactions at around $80bn.
Watch out, some say. Among the things venture capitalists
like about the new service: the longer-term ability to integrate search -
Google's core strength - into social streams. So for example, a favourite
search result could be shared with the click of a button.
Also, the 5% fee Google charges game developers for
transactions on Google+ compared with Facebook's 30%.
And circles, perhaps the most-discussed feature.
"For some time now I have been pitched on businesses
that attempt to solve the groups problem: how do you share information
efficiently with small groups of people?" David Hornik, a partner at
August Capital, told Reuters.
Users can assign their contacts to one or many circles, from
family and work to hobby groups such as book clubs, and select which comments
to share with specific circles.
"Google+ does a nice job of allowing more purposeful
sharing," Hornik said. While Facebook also allows users to segment
friends, it's a less straightforward process.
Hornik says it will take until the end of the year to see
how strongly Google+ is catching on.
Others point to social networking essentials such as group
chat - on Google+, that includes video - and just last week, a roll-out of
Mobile market wildcard
Monsalve likes Google+'s Sparks feature, which lets him set
up lists of topics that interest him, then see related articles or videos. His
Sparks topics are heavy on his portfolio companies.
Facebook boasts 750 million members, but sheer numbers are
no guarantee of eventual success. In late 2006, MySpace had three times
Facebook's users - but Zuckerberg's invention had reached critical mass and was
growing much faster than MySpace. The rest is internet lore.
One key metric some VCs are looking for is how long it takes
Google+ to reach 75 million users who spend significant amounts of time on the
network - say 10 to 15 minutes a day. If that happens in the next couple of
months, the service "starts to become pretty interesting", Monsalve
However, some say Google has already made a few missteps.
Last week, Google+ banned the use of pseudonyms and nicknames on the service,
which some investors say could limit its acceptance among the free-wheeling
David Cowan, a partner at Bessemer Venture Partners whose
investments include social networking sites such as LinkedIn, believes Google+
is missing an opportunity.
"Think about someone who is challenging her government,
or his employer," he told Reuters. "People want to be social in
contexts that do not and should not demand transparency of identity."
Others, such as Dave Whorton of Tugboat Ventures, believes
competition from an unexpected source - perhaps even what he calls
"sharing fatigue" - may prove more disruptive to Facebook than any
rival social network.
With a proliferation of social media sites, including Twitter,
Facebook, Linked In and Tumblr, many people might shy away from adding another
social network to the mix. Those that do may have limited time to devote to it.
ComScore says social networking overall continues to grow
strongly for now, with US users spending 385 minutes in July on such sites.
There is one wild card: with its acquisition of Motorola
Mobility Holdings, coupled with Android, Google may have landed an important
weapon to help Google+ go mobile more deeply than Facebook.
"Ultimately, we move more and more toward mobile,"
Greg Gottesman, a partner at Madrona Venture Group, told Reuters.
He believes advances in social networking on phones could be
key to winning over teenagers, which eventually is "where the battle will
be won or lost".