Google threw in the towel on Google+ but its social problems aren't going away

On Monday, Google admitted the defeat of one of the original ambitions for its 4-year-old Google+ social network when it announced a big "pivot" on Monday.

But while the Internet search giant would be happy to forget about its ongoing struggles in social media, it cannot afford to ignore social. Over the past several years, social sharing and networking have become ever more infused in mobile and web products, making it increasingly important that Google adapt its business, say many analysts and industry insiders.

"With desktop web, people discovered content through search. Now they discover content through social," Brett Northart, former analyst who founded ecommerce company Le Tote, tells Business Insider. "[Google] was in the dominant position when the world was desktop oriented, but now they're getting disintermediated by Facebook and losing market share to a much larger global audience."

Google's growth has slowed as people use mobile more than desktop. Google still reels in much more revenue than Facebook on mobile advertising overall, but according to Morgan Stanley research, Facebook is on track to start winning more new ad dollars than Google. And new research from eMarketer predicts that Facebook-owned Instagram will surpass Google and Twitter in terms of US mobile display ad net revenues by 2017.

Stream Ads

Social streams offer extremely valuable advertising space, and yet Google has no social stream to sell ads against (though it does offer content discovery through YouTube, where Google has seen significant revenue growth).

"Social is where Google has really dropped the ball," Motley Fool analyst Justin Moser tells Business Insider. "And as we move more into an app-driven mobile world, it's facing more headwinds in its core search platform."

Google said on Monday that it would abandon its efforts to make Google+ the common user profile for its broader family of products and would re-focus Google+ to be a place where "users around the world connect around the interests they love."

But building a viable social destination on Google+ seems like a tall order. The network has a small, dedicated group of hardcore users - we've seen research that pegs the number of public, active users between 4 and 6 million, out of more than 2.2 billion profiles total. But compare that to Facebook's 1.4 billion monthly active users or even Twitter's 302 million monthly active users. Google+ is tiny.

Time to buy?

And now that the company isn't forcing new people to sign up and has unbundled some of its most popular features, like Photos and Hangouts, it's tough to see how Google+ will expand its audience.

As one ex-Googler put it, Google's best hope in social is to open its wallet and make an acquisition.

With roughly $70 billion in cash on its balance sheet, Google has plenty of money to spend. There are a handful of social media companies with strong user engagement (and lofty valuations) including Snapchat and Pinterest. And then of course there's Twitter.

The idea that Google should by Twitter became popular last month. Early Twitter investor Chris Sacca said that Google never understood social and that it would be an "instant fit." Google would finally have a social product, get a new ad-stream, and have access to a different kind of real-time search relevancy.

With Google making this major change to Plus that focuses more on its core users rather than growth and uniting identities, that debate could gain some steam once again.

"With Twitter's earnings just around the corner and questions regarding leadership there I wouldn't be surprised to see more speculation regarding a tie-up between the two," Moser says.