Today Jason Calacanis posted his take on Google Buzz.  In typical Calacanis style it’s as inflammatory as it is informative.  Despite that his point is pretty clear and simple: Google Buzz is better than Facebook.  As he succinctly puts it…

Google Buzz 1.0 is better than Facebook after six or seven years.

I have to admit I was a little disappointed in Mr. Calacanis because I think he’s missing the point in a big way.  Which in itself is a big deal because I think Entrepreneurs and VCs are the two groups that need to understand what Google Buzz truly is.

Let me explain what I think Google is up to.

The important thing to remember about Google is that it wins if the open Internet wins. It’s essentially the center of gravity for the web and more importantly it’s the internet’s #1 provider of ads.  So as long as the Internet grows Google will grow almost as fast.

This is the nature of their business.

But that puts them in an awkward spot because on one hand they want to encourage the Internet to grow while on the other they need to impede the growth of any one site else it become “the next Google” and take Google’s place as the center of gravity.  So it has to strike a balance by encouraging the small while disrupting the large. 

That’s the beauty of Google Buzz.

Buzz is not about beating Facebook or Twitter it’s about commoditizing them. If Google can make Buzz the place people check for updates than they can elevate Facebook’s competitors to the same status as Facebook itself. That fosters competition which in turn creates the need for interoperability. Once interoperability becomes an issue Facebook’s walled garden comes tumbling down.

More importantly Buzz keeps the next Facebook from rising up. By becoming the defacto delivery mechanism Google can create a great equalizer of sorts. A way to make sure every company has access to a user’s “social graph”.

Which brings us back to Google’s initial goal. Facebook holds the key to the user’s friend list right now and that threatens Google’s central place on the web.  If Google can commoditize that friend list it can create an environment where there are 30 little Facebooks and they (ideally) all get their ads from AdSense. 

(the same goes for Twitter obviously)

But don’t get distracted. Google isn’t trying to “beat” Facebook. They’ll be perfectly content to have Facebook still out there as long as the company’s no longer a threat. 

That’s what VCs and Startups need to know.  Because knowing that  gives you the chance to capitalize on what Google’s really trying to do which is to empower those who want to compete on features. Google’s trying to bring down the walled garden that keeps other social sites out and if they succeed they’ll elevate a lot of deserving startups as a result.