Google Putting Orkut To Bed

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 |  About: Alphabet Inc. (GOOG), GOOGL
by: Options Calling

Summary

Google is laying to bed Orkut, the company's international social platform.

Active Users dropped from 100 million in 2009 to 66 million in 2012.

Google made this decision due to Orkut's lack of relative success compared to Google's growing platforms, YouTube and Google Plus.

In a blog post on the 30th of June, Google announced to the world that from the 30th of September onwards it would suspend one of its most popular social networking websites, Orkut. But is that a smart move?

The Orkut User-Base

Google's (NASDAQ:GOOG)(NASDAQ:GOOGL) Orkut was quite a success back in 2004 when it was created. Targeting the Brazilian and Indian markets, the social networking website succeeded in making a lasting impression on the targeted countries. Its success in Brazil, particularly, was immense enough to prompt Google to shift the website's operations to the South American country back in 2008. By 2009, the website reported having as much as 80-100 million users worldwide, which reportedly dropped to approximately 66 million in 2012. Another report stated that the drop in users was even steeper, with the decrease in the website's visitors from 2011 to 2012 estimated to be around 86%. Although current figures are unavailable, it would be safe to say that Orkut's user-base has been successfully hacked away by other social networking pages such as Facebook, Twitter and, Google's own, Google Plus.

Why Google Bid Adieu to Orkut

Google's reasoning in doing away with Orkut is very simple;

"Over the past decade, YouTube, Blogger and Google Plus have taken off, with communities springing up in every corner of the world. Because the growth of these communities has outpaced Orkut's growth, we've decided to bid Orkut farewell (or, tchau). We'll be focusing our energy and resources on making these other social platforms as amazing as possible for everyone who uses them."

So even if the company is gaining any profits from its still-large user-base in Brazil (33.7%) and India (25.4%), it's doing the smarter thing by investing the same amount of energy and cash into something even more profitable. Instead of letting a failing business linger, the company has looked to end it altogether and focus on improving its more successful offerings. The move makes a lot of sense since Google Plus, Orkut's most direct alternative of the three features named by the company, already has over 1.7 billion registered users, of which over 540 million are active - over 400 million more than Orkut had in its heyday. The global community had declared its verdict in favor of Google Plus, so it was naturally time to amputate the less successful in-company competitor.

The Target is Facebook

Any social networking website would have Facebook on its mind, right now - and not for any reassuring reasons. The company has turned into a competitors' nightmare within a few years of its global existence. With over 1 billion active users, the website is definitely light years ahead of most of its competitors - and the one everybody, including Google, is looking to beat. Google Plus is the obvious bet for Google to build a social networking website that could overtake Facebook, considering its massive success and user-base was built in just three years. If the success rate continues, Google Plus could be surpassing Facebook in the next few years.

Lessons from Orkut

Orkut might be coming to an end, but there is no reason why Google should wipe its existence from its memory. Instead, Google would be better of learning from the relative lack of success achieved by the website, and use the experience to make Google Plus better. One analyst suggests that Orkut's lack of popularity in comparison with Facebook was due to its "closed-platform approach", since the latter was more open to "apps" and other businesses. Another reason for the website's failure was its lack of success in Western markets, which reduced the expanse of its users' network. Facebook, on the other hand - and Twitter and Google Plus, etc. - was and still is very popular globally. This enables its users to connect to people in different countries, instead of being restricted to those in Brazil and India, for instance.

Therefore, Google should now focus on providing its users with a richer experience than Orkut did, with a wider, global user-base and some interesting apps to attract users away from Facebook. The company seems to have taken a step in the right direction by synchronizing its users' accounts on all of its websites - Gmail, YouTube, Blogger and Google Plus - which naturally has provided them with a richer experience, but to reach out to even more people, it should consider letting other companies do business on its own websites, too. Facebook is a good example of how doing business with other companies can lead to one's own success - and Orkut is a good example of how not doing business with other companies can damage the same.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.