Google+: Turning Into a Negative?

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, Facebooks 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.