Seizing on Orkut's momentum in Asia and Latin America, Google moves to revamp its social networking site and take aim at Facebook and MySpace
If it's not about MySpace and Facebook, then the breathless buzz that surrounds online social networking often gravitates to names such as Bebo and CyWorld. Then there's Orkut. Though early to market, the Google-owned social network hasn't seemed to gain traction anywhere but Brazil. But that laggard status may be fading, thanks to a traffic surge in Asia. And now Google (GOOG) appears determined to eliminate its weakness in social networking, an Achilles' heel that detracts from its dominance in Web search and online ads.
Though MySpace still gets four times as much traffic globally, Orkut recently pushed past the News Corp. (NWS) subsidiary in the Asia Pacific region. Orkut's following in that market, which includes China and Japan, has nearly tripled, to roughly 11 million visitors a month, over the past year, according to the consultancy comScore (SCOR). MySpace, by contrast, has been drawing between 9 million and 10 million visitors in recent months.
Meanwhile, Orkut's usage in Latin America has continued to climb: In August, it received 12.4 million unique visitors from that region, double the Latin American traffic of MySpace and Facebook combined. "Now everybody's got Orkut, even people who don't have their own computer," says 15-year-old Ian Quinonez Gaspar, who lives in São Paulo, Brazil, and has more than 700 friends links.
Web Site Makeover
But that's where the high-fives end for Orkut. Beyond Asia and Latin America, which account for nearly all of Orkut's 24.6 million monthly users, the site's traffic remains simply anemic—totaling just 600,000 in North America and about 1.2 million in Europe, and not growing very fast.
Still, while it's unclear whether its overseas momentum is the inspiration, Google is starting to throw more resources behind social networking. The company recently gave Orkut's site a makeover so it looks more Google-like. It's also launched the site in more languages, including Hindi and Bengali (Orkut is particularly popular in India and Bangladesh). At the same time, Google has been incorporating more social networking features into Gmail and its online Calendar service. "The property has long been neglected. But now Google has recognized the social networking phenomenon is very profound and powerful," says Greg Sterling, the founding principal at consultancy Sterling Market Intelligence.
The next big step, expected in November, will be to open Orkut's software code to outside programmers, a plan first disclosed by Michael Arrington on his TechCrunch blog. BusinessWeek.com has learned that third-party developers based in India have been told that the code, known to developers as an Application Programming Interface (API), would be made available around Nov. 5. While Google declined to confirm or deny these reports, the company did confirm earlier this year it was considering opening up Orkut's code (BusinessWeek, 2/13/07).
A Step Further than Facebook
Once the code is available, independent developers will be able to create a plethora of new applications for Orkut that could boost its usage, judging from the experience at Facebook. Developers have already written more than 3,000 applications for Facebook's pages since that site released its code in May. These "widgets," including a hit called Slide that lets Facebook users embed slide shows in their profiles, are considered key drivers behind a 28% jump in the site's user base from May to August. "Facebook created this tremendous momentum and energy around this idea," says John Musser, who runs ProgrammableWeb.com, a developer news and API aggregation site. "Other players can't stand by." That includes Orkut.
In a move that goes a step further than Facebook, Google may make Orkut's code available with fewer conditions in a bid to motivate developers, especially the thousands who already write applications for services such as Google Maps. For starters, Google may allow developers to host their Orkut applications on their own servers rather than the site's. It's noteworthy that a lot of third-party programmers for other Google sites live in the U.S., a weak market for Orkut. As such, easier restrictions may "go toward creating more awareness [of Orkut] from U.S.-based developers, and that may lead to U.S. user-base growth," says Alex Fletcher, an analyst with software consultancy Entiva Group.
If the plan succeeds, users might begin to see applications combining Orkut with Google Maps that would show where friends are located. Earlier this year, a Google-funded student group at Carnegie Mellon University created a prototype of a messaging tool that can enable users of Gmail, Calendar, and even Orkut to arrange impromptu meetings with friends. Google hasn't said how or when it might deploy the application.
Toward Multiple Network Access?
But there are grander possibilities: If developers can host their Orkut applications elsewhere, that means they can create Orkut widgets to embed in other social networks. For example, an Orkut widget for Facebook might enable Facebook users to see whether their Orkut friends are online through their Facebook pages.
Or, Orkut itself could conceivably become a hub for accessing multiple social networks in one place, a concept demonstrated by another Google-funded Carnegie Mellon group last year in a project called Socialstream. "We don't know what they will use," cautions Brad Myers, project adviser and a professor of human-computer interaction at Carnegie Mellon.
But there are signs Google sees wisdom in a concept like Socialstream. In September, Orkut introduced an array of new features, some similar to those offered by other social networks. One addition was Updates from Your Friends, a box that alerts users to new photos or links to YouTube videos their friends have posted. Another was Feeds, which enables Orkut's pages to display information posted on other sites—such as a blog from Google's Blogger or Six Apart's LiveJournal, or photos from Google's Picasa and Yahoo's (YHOO) Flickr—albeit only those that allow syndication of their content.
Other new features may be forthcoming: In the past year, Google has hired several experts who focus on making Web sites easier to use, and they've been plugging away at Orkut. One is Jeffrey Veen, co-founder of the consultancy Adaptive Path, who helped with the design of the sites Blogger, Six Apart's TypePad, and Flickr. People familiar with the matter tell BusinessWeek.com that Veen is also working on adding more social networking features to other Google sites.
Revenue Growth Questions
It also may be with Orkut in mind that Google acquired a mobile social network called Zingku in September. Zingku allows users to share photos snapped with mobile phones and to set up gatherings via text messaging. "Mobility is very popular in the Philippines and India," says Trip Chowdhry, an analyst with Global Equities Research. "For that customer base, a mobile [extension of Orkut] makes sense." Chowdhry also notes Orkut could prove useful in driving users to Google Apps, the online word processing and spreadsheet programs that compete with Microsoft's (MSFT) business software.
But even if Orkut continues to grow in popularity, it may be hard for Google to translate that into significant new revenue growth. Advertisers in developing markets, where Orkut is strongest, remain cautious about social networks. In Brazil, Orkut was recently forced to pull ads that some users found offensive. So while Google may benefit from showing more ads to Orkut members who are driven to Google Search or Google Apps, direct revenue from Orkut may total just $50 million a year, estimates Chowdhry.
There's no doubt, though, Orkut is showing it can compete with MySpace and Facebook overseas. Now Google needs to show whether it can ride that momentum into the U.S. and Europe, where the real marketing dollars are.