I think there is plenty of space for Google to be more "social" without building a Facebook. FB is a form of aggregating and extracting value from tenuous social relationships that would be too much work otherwise. Google needs to make the same within their space - which is search, mail for end users and ads for content/service providers.

Going head-on Facebook is stupid. The one who succeeds will not have invented a better Facebook - will have invented the next social thing, whatever that is.