I worked at Google in 2005 and briefly on the Orkut team. I encountered an environment that viewed social networking as a frivolous form of entertainment rather than a real utility, and I'm pretty sure this viewpoint was shared all the way up the chain of command to the founders.
At that time, hardly anyone at Google actually used Facebook, so they just didn't understand what people were getting out of social networking products. Incredibly, many people on the Orkut team did not use their own product (let alone Facebook) outside of work. By contrast, everyone I know who worked at Facebook was a passionate user of that product.
Ultimately, I believe Google didn't succeed at social networking because of this widespread misunderstanding of the value in social networking products.