The announcement of Google CEO Eric Schmidt’s departure has sent shock waves out from Silicon Valley.  A former Google employed told the New York Times, “I’ve talked to people at Google today and they were just flabbergasted.”

Schmidt’s departure might be directly correlated to pressure the Google is feeling from social media, specifically Facebook and Twitter.

In Google’s recent earnings call Schmidt deferred to Google founders Sergey Brin and Larry Page when asked about Google’s future strategy in Social Media.  Here are their paraphrased responses.

Brin: ..two important trends. One is the notion of real-time, and the other is the broad notion of social in terms of identity relationships and so forth. Both of those are very important to search. In fact, you’ve seen us roll out functionality along those lines. First of all, we have real-time updates built into our search, which includes Twitter and other sources. You’ve also seen us deploy social search, which allows you to find search results that are related to people who you know and friends of their friends and so forth.

This is really just the tip of the iceberg and there’s far more opportunity. We’ve touched just 1% of the capabilities that could be deployed in that realm, and you should expect us to continue to develop those kinds of capabilities.

Page: The last part of what Sergey says really resonates with me. If you think about the next five years and what your life will be like, online, socially, and what kind of things the tools will be able to do, we’re only at the very very early stages, and I’m incredibly excited about the possibilities

Schmidt’s deferral on social media hints at possible internal tension and the reason for his departure.  It probably didn’t help Schmidt when Google wasn’t able to forge a deal to acquire social deal-of-the-day provider Groupon for a rumored $6 billion dollars.  Google social initiatives Sidewiki, Buzz and Wave have failed publicly.  More damaging is the fact that Facebook has surpassed Google in terms of Web traffic.  Hitwise found that 8.9 percent of unique online visits were to Facebook this year, compared with Google’s 7.2 percent (source: Washington Post).

Ken Auletta the author of Googled posted in the New Yorker today that Schmidt, according to associates, lost some energy and focus after losing the China decision. At the same time, Google was becoming defensive. All of their social-network efforts had faltered. Facebook had replaced them as the hot tech company, the place vital engineers wanted to work.

So Eric Schmidt is out at the Google helm and Larry Page is in.  Page’s first mission will be to figure out Google’s social media strategy.  The task will not be easy as the #1 and #2 searches on Google last year were “Facebook” and “Facebook Login” respectively.

Page seems to be hitting the ground with both feet running.  While not officially taking over until April 4 Mashable reported that Google plans to launch Google Offers which will be a direct competitor to Groupon and LivingSocial.

Moments after the news Eric Schmidt posted on Twitter: “Day-to-day adult supervision no longer needed!”

By Erik Qualman

Recommended books for this post:

What Would Google Do? by Jeff Jarvis

Googled: The End of the World As We Know It