Google Circles is what would happen if Twitter forced people to organize people into Twitter Lists the second they follow someone.
Yet this underscores the fundamental problem with Circles. They're just mine and only I get to see them. In fact, they're even more closed off and private than Twitter Lists, which at the very least show up in your profile, and turn into a way to discover more people who are similar.
On Twitter, you can see how many lists people have been added to, thus turning it into both discovery and social signal. Since Twitter is like high school, social signaling is critical to being able to identify and follow influentials. This fits the social graph of Twitter perfectly, and incentivizes the exact kind of behavior Twitter for which it has always been used.
On Facebook, Groups are the preferred way for people to self-organize. When someone adds someone to the group, it is a shared alteration of the experience. I would argue this is the ideal form of online self-organizing behavior. With Twitter Lists, most of the benefit goes to the user who created it -- while with Circles ALL of the benefit goes to the person who created it. This is one-time work that cannot be reused. On the other hand, with Groups, users who are added to a group can organically add additional members. Once you're in a group, assumedly that group continues to get better over time. A group can arise organically around specific topics.
Ultimately what this amounts to is a shared reality. In the same way Wikipedia becomes better after every single edit forever, Facebook Groups provides a shared reality that, given proper management by the admins, will always get better. And that will always beat Google Circles because it spreads the work of organization over many people instead of just one.
In summary:
- Twitter Lists provide social signal and discovery. High level of effort, but at least there's some modicum of gain to be had.
- Facebook Groups provide a semi-public shared space that automatically gets better. Low level of effort but high amount of social benefit.
- Google+ Circles force people to do a lot of work, but that work is pretty much only useful to themselves. High level of effort and low level of return.
If you're Google, this seems like the wrong end of the spectrum to be at. High work, low return. That's the opposite of what we've come to know about successful social structures online.