Has Google Admitted Defeat in the Social Web Race?

Google (s goog) has been trying over the past year to inject some social networking DNA into the company by building social aspects into some of its services — and launching new services such as Google Buzz — in an attempt to keep up with the growth of Facebook, but so far its efforts have not had much effect. Piper Jaffray analyst Gene Munster now says that the web giant has “given up on social,” because it realizes it doesn’t stand a chance of actually competing with Facebook. The problem with doing this, as the analyst notes, is that as advertisers continue to chase the social graph, Google will have very little to offer them.

Munster made his comments in a video interview with Bloomberg News on Wednesday, and much of his analysis echoed the points we have been making at GigaOM for some time: namely, the idea that Google needs to be afraid of Facebook and its social graph (subscription required), because “social search” is becoming an increasingly competitive force on the web, as consumers look to their friends and social connections for recommendations rather than a simple algorithmic search. While Google is not going to disappear any time soon, it has yet to find a way to really take advantage of the increasingly social nature of the web. Says Munster:

Facebook has shown 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.

Google has been integrating social elements into many of its services — including the addition of Twitter results to its search pages, and an update to its search indexing system to make it more real-time, as well as enhancements to Google News that allow users to customize their news (and the potential integration of Twitter). Buzz, however, appears to remain stalled in terms of mainstream adoption, and there has been little sign of any overarching social strategy, apart from comments from Eric Schmidt that the company plans to add a “social layer” to its services rather than the single Facebook competitor some expected Google to launch under the code name Google Me.

Part of the problem, as Om and others have argued, is that Google doesn’t seem to really understand social networking on a fundamental level, or have social elements as a core part of the company’s DNA the way Facebook does. Although both companies are staffed with engineers, Facebook is driven by being social in a way that Google is not. Adam Rifkin noted in a blog post last year that Google is dedicated to serving people who want to find things quickly and then leave (a group he referred to as “pandas”) while Facebook has focused on getting people to stay longer on the site, and has only recently begun expanding outwards through the use of social plugins such as the “like” button.

In his comments to Bloomberg, Munster also said that Facebook has become the cool place to work, and is stealing employees away from Google in the same way that the search company used to take people from Microsoft and other aging tech giants. Facebook “is like Google was five years ago,” according to the Piper Jaffray analyst, while the web giant is “turning into Microsoft” because it is no longer innovating. And while Facebook may be small compared to Google — with a market value estimated at $50 billion to Google’s $200 billion — Munster said that the social network’s growth rate is much higher, and that it is where “ad dollars are going to go in the future.”

Accusing Google of turning into Microsoft may be a little harsh, but there’s no question the company has so far failed to make much headway in terms of the social web, and Munster is right that advertisers and others appear to be increasingly looking to the social graph and social connections in addition to (and potentially as an alternative to) algorithmic search ads. That is a challenge Google has to find a way of dealing with somehow — and quickly.

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Post and thumbnail photo courtesy of Flickr user Kurt Nordstrom