The sad thing is, if they'd thought even a tiny bit laterally and leveraged the fact that Google Reader was getting a lot of traction and a core of people were beginning to use its social functions, they could have backdoored themselves into being Digg/Reddit/Etc. and had the social media userbase to take on Facebook organically.

Instead, they fought the last war (Gmail vs Hotmail), intentionally eroded and then killed Reader, and with G+ they completely fucked up what was a cleaner interface (if not all that special) and a better technological experience, all while they were a brand that was at that time more trusted than their competitors.