Here’s Why Google+ Means Serious Money

(This is Part 1 of 2 in a series discussing the potential of Google+.)

With the hot IPOs of a new wave of web startups generating plenty of buzz about social media, it has been the perfect time for Google (NASDAQ:GOOG) to drop its newest product: Google+.  Across the internet, business writers and tech gurus alike have been dissecting the pros and cons of what they have labeled as Google’s latest “Facebook-killer.”  Meanwhile, the markets have bought into the idea by driving its stock price from a June 28 open of $484.02 to a close of $534.01 on July 12.  This marks a total market cap increase of $16.09 billion which can be at least partially attributed to Google+.  But besides a post over at TechCrunch that made note of the event, but overall, there have been little to no ventures as to what this new product could actually be worth down the line.  I would say this latest effort is shaping up to be the most successful yet, and I am estimating that it is still very much undervalued in its potential.

I’ve been using and exploring the site for over a week now and there’s definitely much more promise in Google+ when compared to the past failures of Wave and Buzz.  This time Google (NASDAQ:GOOG) has been much savvier about managing privacy with the Circles concept and providing a design aimed at the general populace.  It has fired volleys in Facebook’s direction with the promise of better data policies and intriguing collaboration tools like Hangouts and Huddle.  Most importantly, Google+ has received generally positive media testimony and incredible demand from both users and businesses.  The launch effort has been successful so far, and if Google keeps it up, the website will soon be growing rapidly.

Rapid growth is the key success factor, as Google+ depends on the service eventually reaching a critical mass of followers through exponential growth.  Right now, I can see that Google+ has some UI issues that need to be addressed: Old posts from pundits keep trending up to pollute my homepage, Circles are confusing as my friend lists grow bigger, and the entire Sparks feature is not useful at all.  Also, Google (NASDAQ:GOOG) is still only serving a niche audience of early adopters and hasn’t presented a compelling case for mainstream adopters – what’s the incentive besides merely being trendy?  The consequence that appearance of original or relevant content in my homepage’s Stream has been much slower than on Facebook and Twitter, as well as the level of meaningful social interaction.  However, I believe Google will fix these as time goes on to build a worthy competitor in the increasingly crowded social media market.

This belief is rooted in a tangible change in Google’s (NASDAQ:GOOG) attitude, one that shows it is completely serious about building a social product this time around.  Much has been said about Facebook’s growing threat as a “walled garden,” a $100bil trove of user-specific data which is immensely useful to advertisers and completely veiled to Google’s search algorithms.  The company needs social to not just increase CPM or please investors, it needs social to even stay relevant to marketers in the years to come.  With Google+, Google will be playing every card in its hands to ensure it doesn’t fail because it is running out of chances.

The ambitions of Google+ also extend to Twitter and important real-time news genre .  With important events like the Middle East uprisings and President Obama’s town hall session now happening on the internet in real-time, Google (GOOG) likely wants more control over the direction of another influential medium.  The intention is visible in one of the default G+ Circles called “Interests,” described as “People you don’t know personally but whose posts you find interesting.” Further, Google decided not to renew a contract with Twitter for real-time search of tweets as the agreement expired this past week, clearing the way for Google+ updates to be the most prominent source of up-to-date information.

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Whether Google+ will become a wild success remains to be seen in the coming months but at this point, the foundation is there.  I believe Google (NASDAQ:GOOG) has put forth a product that can be positively compared to its social media competitors, so it should have a fair shot at emulating the numbers that Facebook and Twitter have been achieving.  In the second part of this Google+ post, I’ll outline the growth pattern for the users and revenue of Facebook and Twitter.  Then, the industry background numbers can be used to project how Google+ might grow and become a revenue source for its creators.

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