Google Plus Numbers Belie Social Struggles

NEW YORK ( TheStreet) - Google ( GOOG) is touting its progress toward toppling rival Facebook, announcing its social network, Google Plus, had reached 40 million members just three and a half months since its launch.

"People are flocking at an incredible rate and we're just getting started," said CEO Larry Page, who devoted a significant portion of the company's third-quarter earnings call late Thursday to the product.
Google CEO Larry Page is making bold moves into social

Yet, analysts say these figures may be misleading as they don't make a distinction between active users and those who signed up for the service but never logged in.

"We believe that while the 40m user number is impressive, it forms only 4% of Google users, the early adopters and the curious minority," Collins Stewart analyst Mayuresh Masurekar wrote in a note. "In order to be a major competitor to Facebook, Google Plus needs to have 100 million active users, with significant daily engagement."

Despite increasing its membership base four-fold in three months, interest in Google Plus may be faltering, as the number of public posts dropped 41% from July to September, according to Web services company 89n.

Facebook, in comparison, has seen its user growth taper slow slightly to 800 million members, but user engagement has increased 31% over last year, according to online performance marketing firm Efficient Frontier.

And while Google Plus has been trying to drum up interest in its site through new features like its video chat service, Hangouts, which can be used both on PCs and smartphones, Facebook continues to roll out rival product improvements of its own.

"We remain somewhat skeptical that user engagement levels for Google Plus match those of Facebook," Deutsche Bank analyst Jeetil Patel said in a research note.

Even at Google itself, some employees are skeptical that its social strategy is working.

Earlier this week, an engineer accidentally posted a memo on Google Plus calling the product "a knee jerk reaction" to Facebook's success and "a study in short-term thinking."

He blamed the site's lack of stickiness on Google's failure to work with developers to build games for the platform, as Facebook has done with titles like FarmVille and Mafia Wars.

The site hasn't even caught on with top Google execs, tech watchers have noted. Former Google CEO Eric Schmidt only joined Google Plus this week, and few members of senior management posted on the site until recently.

Page said Google still has a way's to go with its social network and is rolling out integration with the company's other products, like G-mail and YouTube, which will be increasingly valuable.

"Google Plus may not have the user base they want just yet but they should be able to do a lot with it because of the data they'll have on Internet users overall," said Kimberly Maul, an analyst with eMarketer.

It's increasingly essential that Google nail its social strategy.

A recent Nielsen report found Americans spent 23% of their time on social networks like Facebook and Twitter. Jordan Rohan, an analyst with Stifel Nicolaus, downgraded Google earlier this month, on fears "the Internet's center of gravity is shifting from Google to Facebook."

Shares of Google were rising 5.8% to $591.36 in early afternoon trading on Friday.

-- Written by Olivia Oran in New York.

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