Kurt Schiller originally shared this post:


Some Thoughts on Comparing Facebook and Google+ (this is a big one)
The direct adversarial comparisons between Facebook and Google+ are pretty interesting to me. A big part of my interest comes from the fact that I increasingly think they don't make any sense, or at least they speak to a fundamental misunderstanding about how these two big companies operate. Basically, I think it comes down to revenue sources, focus, and diversification.


Facebook's bread and better, its core business, is social media-based advertising and advertising-related activities, such as social gaming and apps. Without the Facebook platform itself, it's got no revenue and no way to make revenue - everything it does is tied to that. If it makes a decision on Facebook that loses money or ignores potential revenue, that loses Facebook money, period. There's no side business of Facebook that can benefit, no other vertical getting traction.

Google, on the other hand, is a bit more diversified. It broadly gets the lion's share of its profit through the same methods - advertising and advertising-related activities - but its business model casts a much wider net. And critically, it is based on search advertising, not social media advertising, and it is already well-established.

That means that social media is still a potential or at least growing source of revenue for Google. It's something it can monetize in addition to its current revenue, rather than something that it needs to protect, as Facebook must with its own social heft. It means, most significantly, that Google+ can be a loss leader as long as it feeds into the rest of Google's business. It also means Google+ can be a business success for Google even if it never cracks that #1 spot (or even the #2 spot), as long as it does well enough to justify its existence in other ways: if not by direct advertising revenue (although that's certainly a possibility, and even a likelihood) then by driving people to other Google services and products that do make money, through integration or just brand power and presence.

The distinction between primary revenue generator and secondary/loss leader status is a big one, I think, and not just because it justifies my semi-rant about it being silly to perform one-to-one comparisons between the two companies. Specifically, it also explains some fundamental design decisions that I've heard people giving as reasons for why they like Google+ (whatever their opinion of Facebook may be -- there's no reason this has to be a Pepsi/Coke situation).

For instance, why doesn't Facebook have something exactly like Circles front-and-center? It's hard to believe that nobody ever suggested it at a meeting and it was never explored -- and, in fact, the existence of Facebook Lists suggests that it was, but went in a different direction). It's probably because it's more advantageous from a revenue perspective that I see my coworker's posts alongside my mother's, because that makes it easier to cross-promote deals, apps, and games between me and everyone I come in contact with on Facebook. The same goes for an inability to simply click a radio button or check a box and block any and all game/app messages on Facebook. Basically, it would impede the way Facebook makes money, for good or for ill -- their partners want the most people possible to find out about their games, and those messages are how the world gets around. It's a big part of why it's an attractive platform. It's akin to TV channels fretting about timeshifting and skipping commercials.

By contrast, Google+ doesn't have to make Google money, at least not directly, and so it can make decisions that would impact a Facebook-like model and yet lose nothing while doing so. As I mentioned above, Google+ can benefit Google simply by attracting people (this could change if the business model evolves, but at the moment Google+ being any sort of success is essentially a success for Google).

Facebook and Google+ really aren't competing, because they're doing different things and working towards different goals. Certainly, they are competing in the sense that they are both social networks. But they have entirely different criteria for success and fit into their creators' portfolios in entirely different ways. A NASCAR driver and a traveling salesman might both spend a lot of their day behind the wheel, but that doesn't mean you can just look and see whose car is faster and decide that that's the better or more successful car. But in much the same way, people waiting with bated breath to see if Google+ overtakes Facebook in subscribers or becomes the "next big thing" are missing the big picture.