Ok, I got it. I will still maintain my original position, so you can take it as a vote in your decision. I think the rules you believe to be fundamental and set in stone are actually a little grayer. Not in the sense that the rules themselves are different, but in the sense that people are willing to put up with A LOT of mistakes in a website's design, usability, and yes privacy model if it is addictive and engaging. Supporting examples of course can be all three: myspace, to a lesser degree twitter (not mainstream), and yes even facebook has some warts:http://www.facebook.com/search.php?q=pregnancy%20test&init=quick&tas=0.9055676660500467&type=eposts
I'm don't know if the effort will succeed but I believe at this point it all hinges on distribution strategy
. This is where the war will be won or lost. Winning over some initial sub-networks and keeping people engaged before the network is sufficient to sustain itself. Subnetworks of individuals already tend to aggregate on different google properties (Maps, SERPs, Youtube videos) on a large scale so Google is in a unique position to distribute hard, the question to me is how aggressively will they push it and if it will be timed correctly.
Its also important to remember that the entire set of people that use Google services are relatively densely clustered in the social graph (I think I just puked a little) which will give them a better chance at the start.
If we are talking in terms of valuations you should also factor in that if Google can take just the 10% of the "upper class", define Facebook as the "dumbed down" for the masses network, and show that its not a winner take all space, this will reduce Facebook's valuation by much more than 10%.
There you go, not sure why I felt inspired to write all that up, but hopefully you can find in there something useful. I think its a very weird situation with this beta right now where we can test our internet prognostication skills since we can use and test this new product for an extended period of time before the public release. Of course, I don't have any skin in game, so take everything I say with a grain of salt ;)