Over the years, Google (NASDAQ:GOOG) has invested heavily in building a social networking platform. So far, it has had two notable failures.
But its latest offering — Google+ — has gotten off to a strong start (since its launch in late June). In fact, it actually is the fastest-growing web service — ever.
Yet now signs are emerging that things are beginning to stall. According to analysis from Experian Hitwise, there was a 5.5% drop in U.S. visits last week to 1.16 million. True, the Google+ service still is by invitation only, so it is reasonable that the growth ramp will be volatile.
However, the more worrisome development is that the average minutes spent on Google+ peaked in mid-July. The key to a social network is engagement, right?
No doubt, this is encouraging news for Facebook. Lately, the company has had some high-profile setbacks, such as the closing of its Places service as well as its daily deals program, which competes with Groupon. But all in all, Facebook remains the clear dominant player in social networking, with 750 million active users.
As with anything in the wild Internet world, it is difficult to judge any new service. Google realizes it likely will take years to make headway with its social networking efforts.
But the problem is Facebook has been re-energized. For example, the company recently went into “lockdown,” which means its engineers are solely focused on intense development. What’s more, Facebook’s expected IPO should be another boost (the deal is expected in the first quarter of next year). Relentlessly, the company likely will take away a growing share of the valuable online advertising market.
Now, such things are inevitable in a competitive market. Yet there is something else that could prove even more troubling: Google’s recent $12.5 billion deal for Motorola Mobility (NYSE:MMI). While this will boost patent protection, it is a highly risky transaction. Google will have the distraction of adding more than 19,000 employees. Besides, does the company really want to operate large, low-margin manufacturing facilities across the world?
It looks like Google wants to pursue the Apple (NASDAQ:AAPL) model — that is, having mobile offerings that have tight integration between software and hardware. It’s a reasonable strategy, but it will be incredibly tough to pull off. Will an Android-Motorola handset really get much traction against an iPhone?
It seems unlikely — at least for the next couple years. So for investors, it’s probably a good idea to be cautious on Google.
Tom Taulli is the author of various books, including “All About Commodities.” He does not own a position in any of the stocks named here.