Google, Facebook Rivalry to Heat up in 2012

As Google works to make its Google+ social network a major competitor to market leader Facebook, the battle between the two could reach a critical point in 2012, analysts say.

Facebook, the world's largest social network, and Google, the world's largest Internet company, are increasingly going head-to-head in a battle to be the top social media player and get the big advertising dollars that go with the position.

While most analysts think Facebook retained its wide edge this year, most agree that the battle is likely to heat up further in 2012. And that means users of both Facebook and Google+ should expect a lot of new features and more integration with third party products.

"This is a fight for survival for Facebook -- and for relevancy for Google," said Rob Enderle, an analyst with the Enderle Group. What happens in 2012, he added, "will make the difference between whether there is a Facebook by the end of the decade and whether Google can become truly relevant outside of search."

If Facebook files for an Initial Public Offering in the first half of 2012 as many expect, a huge influx of cash would bring it more muscle to take on Google.

"The big moment will be Facebook's IPO," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "This will define whether Facebook has the resources to hold off Google. A strong IPO would make Facebook a peer. And a more-focused Google could take Facebook out if the IPO fails. So it all hinges on a successful IPO."

Google was responsible for the biggest news in social networking in 2011 with the June unveiling of Google+.

Google's social network looked and functioned much like Facebook -- enabling users to post status updates, share links and upload photos. Right out of the gate, Google+ gained a lot of attention and a quick onrush of users.

To date, Google+ hasn't hurt Facebook, which turned out to be a tough competitor against a product that has the backing of a company with strong clout and deep pockets.

"Google+ hasn't made much progress versus Facebook this year," said Dan Olds, an analyst at Gabriel Consulting Group. "While no one expected Google+ to blow Facebook out of the water, I do think most watchers believed that Google+ would present a larger challenge. After a big introduction and mostly positive buzz, Google+ has seemed to fizzle a bit."

But he expects the competition to intensify in 2012 as both companies seek some of the massive advertising money spent by major companies on social sites.

"We're not going to see any knockout blows in 2012," Olds said. "The companies are too closely matched for that.

"I think Facebook wins 2011," he added. "I'd say most observers would have predicted that Google and Google+ would put a big dent in Facebook by capturing a significant number of Facebook users. But that didn't happen. Facebook held onto their market share and even expanded it a bit."

Moorhead disagreed, giving Google an edge in 2011 as a company that gained a strong foothold in a market where it didn't even compete in 2011.

"Google finally arrived with a compelling value proposition, but is very far behind in engagement and reach," said Moorhead. "[For the next year], Google will integrate Google+ into every property it has, including the Android OS. Facebook will develop benefits programs to reward users to share every element of their life on Timeline -- where they eat, shop, drink, work out, what they watch, read, listen to."