Google's Threats downplayed as Networking Sites take over the Web Industry?

Microsoft has recently paid $265 million dollars for a minority stake in Facebook - taking the value of the social network site to $16.47 billion. Microsoft snared an exclusive banner advertising deal across all Facebook sites as part of this deal.

This move has prompted the following question: as more and more internet activity is occurring within social network sites rather than on the open internet, is it possible for Google to maintain market leadership? This question was recently proposed to chief executive Eric Schmidt, who strongly refuted the possibility.

Schmidt maintains that unlike social networking sites, Google's strategy involves web search, advertising and applications. Further, he acknowledges that although these networking sites are successful, Google does not necessarily have to own them to be successful.

He emphasises instead, that partnerships are adequate to achieve the necessary benefits of such consumer trends.

Google's future success, asserts Schmidt, is dependent on their ability to alert their desired target market of the range of improvements to existing web-based applications.

This focus on improving existing products is important, as it has already been acknowledged that simply adding products to the Google line up is not an effective strategy to grow the company, because people simply will not know about these.

A coherent strategy that solves real problems customers have is what is required, according to Schmidt. This will be achieved at Google via a stringent focus on investing in innovative product improvements whilst at the same time cannabilising ineffective ones.

Whether or not this strategy, in combination with social networking company partnerships is sufficient for Google to maintain competitive advantage has yet to be seen.