Everyone Wants Readers Except Google

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Earlier this year, Google (NASDAQ: GOOG) announced it will close the doors on Google Reader, a widely used RSS reader the company has offered since 2005. With the Internet giant closing the book on the beloved news aggregator on July 1, millions of users are scrambling to find a replacement, while several high profile companies look to provide an alternative.

Why Google is ditching

A post on the Google Blog in March stated simply, “While the product has a loyal following, over the years usage has declined.”  Perhaps the biggest shift since Google Reader’s inception has been in how we find and consume content on the Internet. The rise of Facebook (NASDAQ: FB) and other social networks has most of us relying on a subsection of our friends to curate articles and videos for us. As sharing articles through Facebook rose in popularity, Google saw Reader’s usage decline.

At a time when computing and how people use and access the Internet is changing, Google can’t afford to support hundreds of different Internet services. Instead, the company is sharpening its focus on fewer products to maximize its earnings.

Reader wasn’t the only product to get the ax, but it was one of the most popular. Estimates are that Google had several million weekly active users. But Google never monetized the platform, so a service with just a few million users wasn’t worth very much to it. This is the company that has over 1 billion YouTube visitors a month, more than 425 million Gmail accounts, and more than 130 million monthly active users on Google+, all of whom happily tolerate ads.

Just because Google never monetized Reader, doesn’t mean the opportunity doesn’t exist. Numerous companies, big and small, are vying for the abandoned Reader users in order to get their ads or premium features in front of their faces. While several million un-monetized users is a blip on Google’s radar, it could mean a lot more in the hands of another company.

A direct replacement

On Monday, AOL (NYSE: AOL) released a beta version of its Google Reader replacement. The site allows users to import their feeds from Google Reader and gives users the most basic of features. As far as replacement options go, it’s certainly not the best, at least in its current form, but it does have the popular AOL name behind it.

Early indications are that AOL plans to use its new reader to direct users to its other services such as its content curating homepage, search engine, email, and particularly its AOL On Network. The On Network currently has about 35 million unique visitors per month, so if AOL can funnel several in from Reader, it could prove significant. 

Video advertising is usually more lucrative than the typical display ads that AOL serves all over the Internet through its websites and content creators in its ad-network. It’s no wonder AOL is trying to grow its video network. But the odds that Reader will help them do it appear rather slim for now. The product simply isn’t up to par with the competition.

Social Readers

Facebook, perhaps the biggest reason for Google closing the books on Reader, isn’t trying to make an exact replacement for Google Reader, but is instead encouraging users to do more of what they’re already doing. The Wall Street Journal reported that the company has been working on a service it creatively calls Reader, which displays content from Facebook and other publishers.

Reader will be catered toward the mobile device audience, where Facebook is becoming increasingly aggressive in its monetization efforts. The bottom line for Facebook on mobile is to get users more engaged with its service. That’s what it was attempting with Facebook Home, the Android skin it launched in April.

Providing them with an endless feed of content they’re likely interested in is a good way to keep them in the Facebook ecosystem longer and open up new advertising opportunities. News apps, in general, generate the longest user sessions.

But Facebook will need a premium product and excellent marketing to attract a large audience to its new Reader app. The competition is fierce, and it’s not the first social network to venture into the territory. Twitter, by its very nature, is practically a news aggregator. LinkedIn (NYSE: LNKD) entered the arena with its purchase of Pulse in April.

Pulse provides LinkedIn with a built-in user base of 30 million readers and a platform to keep its 200 million users engaged. LinkedIn’s users are far less engaged than Facebook’s, but the company has been making strides to change that. It redesigned its homepage and introduced the Influencers program to generate unique content.

As a result, average page views continue to climb, growing 63% in the first quarter. More page views leads to more advertising revenue from its Marketing Solutions service, which rose 56% year-over-year in the first quarter and has seen sequential growth for six of the last eight quarters.

Google’s loss

The likeliest winner of Google Reader’s lost users is some private company. Dozens are working on replacements or alternatives that will go head-to-head with Facebook, AOL, and Pulse.

But what’s interesting is that Google, with its sizable social network and its Google News service, didn’t try to integrate Reader more closely with those two products. Google, unlike the other companies mentioned in this article, isn’t concerned with engagement. By its very nature, it sends users away from its website.

Some other company will build a service that people love to use and get tens of millions of people using their platform. Maybe then Google will buy it, and we can have our Google Reader back.

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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook, Google, and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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