Here are my thoughts as an engineer at Google. These are my own thoughts, not Google's :)

I don't think Google is fighting for its life; people are not defecting away from search to use Facebook's search or Bing or whatever. Right now, Google+ is something like, "let's see what happens if we build a social component and integrate it with our products". It doesn't seem like much right now and it's certainly not killing Facebook, but that's not the goal; the goal is to have something in case being able to post pictures and "interact with brands" turns out to be important in the future. (Do people like ads? I say no; I avoid them at any cost. But many people like ads and like companies and like products. So we'll see how that goes! Look at the brand Apple has built. That's advertising, my friends.)

It's easier to understand if we look at past events. So let's take Picasa, for example. It was never as popular as Flickr or even SmugMug. Why bother maintaining it when it's clear that Google "lost" to Flickr? The answer is because it could later become relevant. Now that people are running around taking pictures with Google phones, sharing them with GMail and Google+, it's logical to have a Google-owned picture repository. That way, we get total control over the user experience and can make a really integrated product. Take a picture on your phone, instantly share it with your friends from your computer. Pretty neat!

Google Play is similar. People loved iTunes' integrated payment system, music store, book store, movie store, app store, and phones. Google had all the infrastructure for these things (Checkout, Music, Books, YouTube / Video, Android Market, and Android), but not integrated, so people didn't tend to buy Android phones to get apps and content. But, time allowed Google to unify these discrete components into Google Play, and now users have access to something very much like iTunes. It was a very slow incremental thing, which people aren't as excited by as "one more thing" style announcements, but now we have something that's pretty cool and will make Google products more attractive than they were before. It was worth keeping stuff like Checkout and Books alive, even if they were not exactly putting PayPal and Amazon out of business.

So today, Google+ is maybe not the best thing ever. But some day, it might be a useful piece of software to have, and so we have it. Right now, I think it's really great as an internal bulletin board that I can fine-tune to exactly my interests. It may not be as cool as Facebook, but it's still a useful piece of software that was worth writing. (I've never seen an internal bulletin board system that lets me subscribe to certain topics and people, after all.) Rather than ensure that everything we push is an epic success on day one, we're putting it out there for people to try. Some people don't like Google+, some do. I use it as a better Twitter; the interface is nicer, I can write more, and so I use it more than I used any "social" products before Google+. So there's one data point, though I realize I am not the average user. (Facebook never excited me and I didn't have an account. Google+ was interesting enough to entice me into trying social networking.)

Yes, management sounds a lot more excited about Google+ than I do, and that's fine, Google is not my company and I am more practical :) Worst case: G+ is a nice internal tool for Apps customers. Middle case: something that's good to have if we want to play with social ideas. Best case: a new way to use computers that people love. All are good.

(Remember Google Checkout? It was a nice foundation for Google Wallet. So it's worth trying things and having products that may not be the industry leader, because you can always improve them!)

Personally, I'm working on a new product at Google that will make computers do something that they've never done before, something that many people have wanted for a long time. I have no idea how it will ever make money, but we're doing it anyway because people will like it. And no, this is not some rogue 20% project. :)

So to summarize; I'm not upset with Google for creating products that are not overnight successes. Yes, social is where your friends are, and everyone is on Facebook today. Clearly Google+ isn't enough to get people to abandon their friends for a while. But it's worth continuing to develop, because it will only get better with time. I don't think that means the end of Google :)