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Branching out into yet another area of the Web, search engine Google (Nasdaq: GOOG) has quietly unveiled a social-networking site designed to compete with the fast-growing Friendster.
Like Friendster, an invitation from an existing member is required to join the site, known as Orkut, which breaks free of its parent in many ways, lacking the distinctive, stripped-down Google interface. In fact, the home page says only that the site is "in affiliation with Google."
Orkut is the brainchild of one of Google's engineers, all of whom are allotted 20 percent of their overall work hours to pursue independent projects. The site is named after that engineer, Orkut Buyukkokten.
If You Can't Buy 'Em...
Published reports have suggested that Mountain View, California-based Google attempted to acquire Sunnyvale-based Friendster last fall, dangling a cash offer only to have talks between the Silicon Valley neighbors, which share many of the same private venture backers, collapse.
Google could not be reached for comment. The company indicated Orkut is still in testing phase and that the parent company is not taking an active role in developing or promoting it. In fact, the launch took place without fanfare, with Google employees and friends reportedly among the first circle of users.
Friendster became one of the hottest online stories last year as it grew rapidly, fueled by powerful word-of-mouth. The site is part networking tool, part informal dating service.
A bevy of competing sites, including Ringo.com -- which has been acquired by online dating company eMode -- and the business-focused Ryze.com, have sprung up in recent months. Other 600-pound gorillas, including Microsoft (Nasdaq: MSFT), which quietly introduced Wallop.com last year, have their eyes fixed on the segment as well.
Wait and See?
One reason why Google is not plunging headlong into the social-networking market by providing more direct backing to Orkut may be the continued uncertainty about whether social networking sites can morph from online phenomena into money-making businesses, Forrester Research analyst Charlene Li told the E-Commerce Times.
In fact, with Google reportedly putting final touches on an initial public offering, which could hit Wall Street in the first half of this year, it may be reluctant to take risks on any uncertain ventures.
Indeed, Yankee Group analyst Rob Lancaster said Google is unlikely to want to detract from its main focus on search and the huge revenue potential it represents. Companies on the verge of IPOs are under intense scrutiny by both the public and their private investors and have to remain focused for that reason.
"Google's mantra -- and the whole industry's, for that matter -- has been that there is huge upside in keyword search and text ads, that they've only started to tap the potential," Lancaster told the E-Commerce Times. "That's their core business, and anything else they do is really a side project."
From Meme to Revenue Stream
"These sites are picking up users by the millions, so that's obviously attractive to investors," Forrester's Li added. "But until someone can demonstrate that they're a sustainable business that can be profitable long-term, I think it's still a highly speculative area of the Web."
In fact, creating a site that attracts users may be the least challenging aspect of the market, since several such sites have quickly racked up members. Figuring out how to turn those user bases into revenue streams could be a more daunting challenge, because most of the sites are free to use and contain little advertising space. One option may be premium services, such as Weblogs, image uploading and customized pages, Li said.
No Stone Unturned
The social-networking niche is just one of the corners of the Web where Google, which built its reputation and user base by creating what is widely considered to be the Internet's best search technology, has sent out feelers.
In addition to a news-aggregation site, Google also has a comparison-shopping site called Froogle that has long been in beta form, and the company maintains a searchable database of Usenet postings.
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