Google's Schmidt Erred in Online Identity vs. Facebook

Google Executive Chairman Eric Schmidt admitted that he failed to move quickly enough to address the growing threat of social-network power Facebook.

Google (NASDAQ:GOOG) Executive Chairman Eric Schmidt acknowledged that he failed to move quickly enough to address the market for online identity, enabling Facebook to build the world's largest social network.

Schmidt, who passed his CEO baton to Google co-founder Larry Page in April said May 31 at the D9 conference in Rancho Palos Verdes, Calif., that he knew he needed to move more aggressively in the social-network arena but failed to do it.

"A CEO should take responsibility. I screwed up," Schmidt said in his often candid way, noting that he and fellow executives discussed the growing Facebook threat in internal memos four years ago but did not act on the trend quickly enough. AllThingsD has this clip of Schmidt speaking yesterday,

Founded by young CEO Mark Zuckerberg, Facebook comprises a social network of over 600 million users. Facebook also represents Google's biggest threat on the Web today. Google has the lion's share of Web search, with more than 1 billion searchers, and offers Gmail and other popular Web services.

However, Facebook is currently notching serious user engagement, the core stickiness metric that gauges not only how often people frequent a Website, but how much time they spend there.

Facebook users are spending a half or more of their time on the social-networking site a day, messaging and chatting with friends, planning events, and sharing photos and videos. Facebook has even extended its reach outside its walled garden with its "Like" button, allowing users to share information about their tastes and preferences about Websites and brands with their friends on Facebook.

Schmidt said Google would love to access this wealth of data. Facebook renders its data untouchable by Google's search crawlers, opting to cede this information to Microsoft's Bing search engine.

The social-network stickiness and Google's inability to index Facebook data are disturbing enough to Google. Facebook also poached top Google ad executive Sheryl Sandberg, who as COO for the last two-plus years has aggressively ramped the company's social ad services.

ComScore said Facebook now commands 31 percent of display ad share, which reduces the online ad pie for companies such as Google and Yahoo.

At D9, Schmidt also indicated that while he admires a lot of what Facebook has done for online identity, he believes such a fundamental service shouldn't be owned by a single company.

"I think the industry would benefit from an alternative to that...Identity is incredibly useful because in the online world you need to know who you are dealing with," he said. This would help Google build better profiles of its users.

Google hopes to cultivate some of the social engagement and ad success Facebook is enjoying with its +1 button, which is launching today to Websites everywhere.

Users will be able to click the +1 button next to every search result and search ad to signal their preferences and tastes to friends they are connecting to through Google Profiles. Ideally, +1 will provide another target for Google's massive advertising base.