Launching a social-networking application such as Google Buzz is a logical—even necessary—way to reverse that trend. Yet recent experience suggests that Google just doesn’t grasp this important market. Its previous foray into social networking was an outright flop. Orkut, a MySpace copycat which was launched in January 2004, has faded into relative obscurity. Today, nearly 90 percent of Orkut’s traffic is confined to Brazil and India.

“Google has achieved ubiquity as a search engine, but the question is, are they too late to this particular dance?” said Mike Jude, a consumer communications analyst at Frost & Sullivan, in an interview.

Jude envisages a world where one day consumers will predominantly use one platform to share files, contact friends, send emails, and do searches. With Facebook in the process of developing its own email application, in addition to teaming up with Microsoft to develop its own search product, it’s entirely possible that Google could still lose the war of being the Web’s most popular destination, posits Jude.

Ironically, the very firm which Google trumped in the online space a decade ago may be one of its biggest threats.

“Microsoft is still trying to imagine what the next big thing will be, and it probably has as good a shot as Google does [at succeeding]. Google is a child of the Internet, while Microsoft is a child of the desktop, but they are both shooting at the same target,” Jude added.

In a troubling sign for Google, its stellar growth rate is beginning to converge with that of Microsoft. In the past five years, Microsoft has grown its earnings at a paltry average pace of 10.9 percent, while Google has managed a whopping 43 percent average year-on-year growth, ending 2009 with $6.52 billion in profits and $23.65 billion in revenue. This year, however, analysts expect a very different picture, with both firms managing 18 percent earnings growth. Google is expected to achieve a similar rate of growth for the next five years too.

In part, Microsoft’s leap into solid double-digit earnings growth can be attributed to initiatives such as the $240 million, 1.6 percent stake it took in Facebook two years ago and the subsequent partnership that developed between the two companies. If Facebook ends up being the Web’s most-visited destination, Microsoft’s Bing search engine and other applications such as instant messaging are likely to benefit from that relationship in a big way.

Microsoft also benefits from a deal it struck with rival Yahoo to power search results using its own Bing search engine in return for a slice of Yahoo revenue.

Of course, Google has a pile of cash on its balance sheet, remains the No. 1 destination for searches worldwide, and draws advantage from Gmail, which has the best memory and general functionality of any free email service around. Recent acquisitions such as Aardvark, a half social networking, half search site, have been well-received.

And then there’s Google Wave. The company which claims one of its core missions is “to make the Web more social” is taking that adage to the heart of its new online document collaboration product. Wave lets multiple users edit the same documents and files in real time, all within a Gmail-style application that pushes the newest changes made to the top of the inbox in the same way that someone gets an email.

There are some irksome flaws with the product, though. Most notably, users cannot delete members from a collaboration project once they are added. Still, if Google succeeds in making Wave successful, it could easily find itself with its very own online version of a Microsoft Office suite—with ads attached.

But a great team of engineers and a powerful brand aren’t enough to guarantee the success of a software product, as the launch of Google Buzz or Microsoft’s initial efforts in online search show. Google can’t afford any major missteps if it wants to maintain its status as the most popular and powerful destination online.

“Right now, Google has so much credibility out there, and people love them,” Berkowitz said. “So Google can make mistakes, although it’s clear [from Buzz] that people won’t forgive Google indefinitely. Google has to keep earning that loyalty.”

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