I generally try to avoid writing about a topic everyone and their grandmother seems to be writing about. But the amount of analysis thrown behind the Google+ vs Facebook debate seems to overlook and important aspect about any new product launch, which is the true value proposition to the end user, and that end user’s propensity to switch to another product. This applies not only to the Google vs Facebook debate, but also on the uptake of “new” services like Foursquare and Groupon, and hence warrants taking a closer look.

New kid on the block vs established

First, let’s look at the issues a lot of critics point out: Users do not equate to usage. Google has the mind share of most of the internet world one way or another. And it is easy to see why they have amassed the largest user base on Google+ than any other social network.

The uptake of Google+ mirrors that of the installed base of Gmail accounts:

So then critics point to the fact that usage is very low. Bime Analytics conducted a poll and found that only 17% of Google+ users are active. ComScore also points out that traffic on other networks in the past month have gone up, not declined, indicating that Google+ is not stealing any traffic from other networks.

MySpace founder Tom Anderson takes the other point of view, and points out that Google+ offers not only improvements to Facebook, but also to Twitter and similar social networks, and as such offers a wider appeal than Facebook. His argument is that the public side will eventually draw enough user to make the private context relevant. His arguments are indeed compelling when you consider the amount of mind share other Google sites have.

If you look at research behind new product development though, you may not agree with Anderson. Research shows that those launching a new product tend to over estimate their product’s relative improvement by a factor of 3. And when you look at individuals, they do not behave rational, and their choice in adapting new products and services are influenced by four characteristics:

1) People evaluate the attractiveness of an alternative based not on its objective or actual value, but on its subjective, or perceived value;
2) Consumers evaluate new products or investments relative to a reference point, usually to a product they already own (or use, like Facebook);
3) People view any improvements relative to this reference point as gains and treat all shortcomings as losses; and
4) Losses have a far greater impact on people than similarly sized gains (“loss aversion”).

The gains must outweigh the losses by a factor for 2-3 before most people find it attractive to make a switch. Hence any new product that entices mass uptake has to be better by a factor of 10 (for more on this, see an analysis on the uptake of mobile TV and 3G video I wrote a few years ago). Does Google+ offer a 10x improvement over Facebook? At this stage I would say no, for reasons that go beyond Facebook’s massive library of personal assets, formed connections, games, applications, and more. Does it mean Facebook has won and there is no point for Google to try? Certainly not. Facebook as anyone else has to stay relevant (just ask Anderson himself) and move with the times. So far they have proven more than capabable to evolve and respond to user desires – and if they continue to do so, it is not likely they will be replaced as the main social channel.

Creating something new

Facebook’s dominance does not mean there is no room for new services in the social space. Innovators like Foursquare and Gowalla created the check-in, forcing Facebook and Google to copy it. However, the problem with a function like checking-in is precisely that it can be copied, and Facebook has way surpassed Foursquare and Gowalla in check-ins as these players simply cannot amass active users as fast as Facebook amasses adapters of a new functionality. There will certainly be room for nieche services, but those services have to also be a 10x improvement to the alternative – and they have to stay that way. Beyond the people who like the gameplay of checking in and receiving a badge – what does Foursquare offer other than telling your friends where you are for whatever reason? And Facebook knows better than anyone else that game players are fickle. Keep innovating or they’ll move on to the next game in a heartbeat. Foursquare is trying to reinvent themselves with innovative advertising deals, which is a smart move, and they will have to keep innovating to stay ahead of the game if they are to continue to be relevant.

Beyond the check-in, the new craze is of course deals. Although coupons can hardly be considered a new concept, the rapid online success of Groupon has caused an insane number of copy cats. However, little innovation has been brought to the table, causing evidence of fatigue among users (Source: Wedbush Securities):

What is the alternative to not using Groupon and the likes? Well, it is not using coupons at all. It appears that despite the rapid success, the online coupon is far from the 10x improvement to shoppers that do not use coupons. The good news is of course that the value propositions will evolve as this is a young space, but the coupon players that do not evolve in their value propositons will simply fade away.

Relevance and value proposition are a moving target

The point of the three examples is to really illustrate that to dig into whether a new product or service will succeed or not, you really need to dig into the value propositions offered. You need to not only understand what a service offers, but how it compares relatively to other services or choices the consumer/end user can make. Any new service being launched needs to not only draw on on the initial value proposition that they may provide better than the alternative – they need to continue to evolve as they understand their end users and as end users understand them and their options better.