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Facebook’s Big Wake-Up Call

Note From Louis Basenese: The social media scene is in the midst of a big shakeup. And it’s no surprise that Google (Nasdaq: GOOG) is the Shaker-in-Chief.

Two weeks ago, the tech giant launched its eagerly anticipated new social networking service – Google+ – throwing down the gauntlet to Facebook.

It’s also no surprise that Google+ is already going gangbusters. Naturally, we’re on top of this tech story and today and tomorrow, my colleague, Justin Fritz, and I are going to serve up a two-part column for you.

In Part 1 below, Justin tackles the consumer side, comparing Google+ and Facebook and whether Google+ poses a long-term threat to the industry’s dominant player.

Tomorrow, I’ll explore the investment side of an “inevitable” Facebook IPO (according to the company’s COO, Sheryl Sandberg), analyzing the risks and opportunity. But first, Justin’s piece…

* * *

If at first you don’t succeed…

Google first started nibbling at the social media market back in 2003, so Google+ isn’t the company’s first foray into the arena.

However, its previous attempt to knock Facebook off its lofty perch – Google Buzz – failed to catch on in February 2010 because it didn’t offer anything new.

Far from being deterred, though, Google has hammered away at the industry. Heck, 25% of its employees’ bonuses this year were based on social media progress. That incentive produced Google+.

So has Google hit the jackpot this time?

Google+ Has Facebook on the Run

Having launched Google+ on June 28, new accounts are already poised to hit 10 million. So it looks like Facebook was right to be scared.

And while some people are calling Google+ another failure in the making, I’m convinced that it could finally give the search giant a competitive edge in the market.

You see, although Google obviously borrowed from Facebook’s general design, its cleaner interface and enhanced features are sure to turn some heads.

Here are a few advantages that Google+ offers:

~ Circles: This is Google’s answer to Facebook’s clumsy “groups” feature. Circles allows you to place your contacts into custom categories, like rock climbing buddies, cool family, not so cool family, etc.

You just drag and drop a contact into as many categories as you want. Then, when you post an update or link, you just select which Circles can see the post. (Not just Friends, or Friends of Friends like you see with Facebook.)

As Peter Eckersley, a senior staff technologist for the Electronic Frontier Foundation, says, “Google+ is clearly designed to give people better control over their privacy with respect to their family, coworkers and friends.”

That contradicts Facebook’s attempted smear campaign. It hired a PR firm to encourage the media to investigate privacy issues with Google’s “Social Circle” feature, with Facebook claiming that Google stole its data.

~ Huddle: This allows you to open a group chat room and connect with specific contacts and Circles all at once – useful for when you and your friends can’t decide on a movie time or restaurant.

~ Hangouts: Hangouts let you video chat and watch YouTube videos with up to 10 people. (Facebook’s new Skype feature only allows you to connect with one contact for free.) So it’s great for connecting with family or conducting work meetings with telecommuters.

~ Instant Upload: If you despise uploading photos from a mobile device, you’ll love this feature. Basically, every picture you snap with your smartphone is instantly uploaded to Google+. (You can then share them with specific Circles later.)

Bottom line: Google+ offers an impressive upgrade of Facebook’s current model. And besides a few opening jitters, I fully expect it to make hay with consumers.

In fact, keeping pace with strong consumer demand is Google’s toughest challenge at the moment, according to former CEO, Eric Schmidt.

Not a bad problem to have.

But is it enough to make Facebook squirm? You bet!

Catch Up, Or Else

From my tests, I can tell you that Google+ is certainly more user friendly and streamlined than Facebook.

It looks like investors agree, too, with Google shares having jumped by 11.2% since Google+ launched two weeks ago.

Granted, Facebook has a vice-like grip on social media, with over 750 million accounts. And that kind of following doesn’t just jump ship overnight.

But if Facebook doesn’t work some superior features into its own platform, it won’t be long before subscribers notice that the grass is greener with Google+.

Good investing,

Justin Fritz

P.S. Stay tuned for tomorrow’s edition, when Louis Basenese will run through the investment merits of Facebook (once the firm launches an IPO) in greater detail – and revealing a massive opportunity from it.

Justin Fritz

, Executive Editor

View More By Justin Fritz