CEO Eric Schmidt, who is soon to be re-deployed as chairman after founder Larry Pagetakes the reins in April, gave an interview over the weekend from Buenos Aires where he gave clues as to the search-giant’s new social media strategy in Latin America.
“I disagree that the only thing Google can do in social networking would be buying Twitter simply by the observation we have a very successful social network in Brazil, Orkut, which is growing and expanding,” hit back Schmidt after a Reuters reporter asked him if Google would be acquiring the micro-blogging site. After managing to dominate the internet search and advertising markets, Google has seen its dominance questioned by the rise of social media, especially Mark Zuckerberg’s Facebook, but also by others such as Twitter, LinkedIn, and Groupon, to name a few. (Read JP Morgan Starting ‘Social Media’ Fund To Invest In Twitter, Facebook, And Other Private Companies).
Schmidt, speaking from Buenos Aires, highlighted that in its fastest growing region, Latin America, the progress of e-commerce, and Google’s social-networking success with Orkut, are helping to create one of the most dynamic and relevant markets worldwide. Latin America only makes up 2% to 3% of Google’s massive $29.3 billion yearly revenues in 2010, but Schmidt considers “it will become a much larger percentage very quickly. Brazil is, for example, already on its way to becoming our sixth-largest country in revenue.” (Read Petorbras To Focus On Brazilian Production To Outstrip Exxon Atop Oil Markets, CFO Says).
And in this battle for internet dominance, Brazil comes front and center. Brazil is the only market in which Google, through Orkut, has managed to beat Facebook in the social media sphere. Having lost its lead in India, Orkut now holds on to Brazil as its last stronghold, where its 32.7 million users outnumber those in Zuckerberg’s network by nearly a 3-to-1 ratio, according to the Times’ Bits blog. Alexa, the online metrics and analytics website, ranks Orkut as the fourth most popular website in Brazil, trailing google.com and its Brazilian version (google.com.br), and YouTube (which is also owned by Google). Facebook ranks eighth.
Alexa’s worldwide rankings show a different story, Google dominates the first and third positions with its search engine and YouTube, while Facebook appears at its heels in second place. Twitter shows up ninth and Orkut lies far in the distant 83 position, making it clear why Google wants to focus its energies on Latin America and more specifically, in Brazil. Argentina and Mexico, two of the largest Latin American markets, have Facebook ahead of Schmidt’s Google and Orkut nowhere in sight.
The fight between Google and Facebook over Brazil and Latin America intensified last month when Zuckerberg’s company poached “the top Google executive in Latin America to be its vice president for sales in the region,” according to Bits. Alexandre Hohagen, who had helped establish Google’s Latin American presence, was put in charge of building a local advertising team in Brazil, where its audience had been seven times smaller than Google’s a year ago.
And the fight is set to continue, as the two internet giants duke it out. But there is more to be read into Schmidt’s statements. He said that e-commerce was another of the reasons why countries in Latin America were growing at impressive rates of 50% to 100%, (“[which] means you’re almost doubling revenue every year,” noted Schmidt). Mercado Libre, the largest e-commerce platform in Latin America, grew its revenue 27% to $62.3 million and its profit 41.2% to $15.9 million in the fourth quarter of 2010. With most of its sales coming from Brazil,Mercado Libre is sure to be a fierce competitor, or strategic ally, for anyone looking to tap into that market. (Read MercadoLibre’s Profit Grows More Than 40%).
While still the king of the net, Google doesn’t have a clear path forward. Social media has proven elusive, where, expect for Brazil, most of its attempts have failed. Acquisitions are becoming increasingly complicated, as the failed Groupon deal and the sky-rocketing valuation of internet start-ups (in great part due to trading in private company stock through secondary markets) make clear. Reshuffling management, with co-founders Larry Page taking the helm in April and Sergey Brin working on strategic products, Google is looking to re-engineer itself to avoid becoming obsolete. Only a few years ago, Google was seen as the master of the new business model; it seems the internet has pushed time into warp speed.