Larry & Sergey are only humans. They can get bamboozled by people just like anyone. And they are in a situation where the very best bamboozlers are trying to bamboozle them, all the time. The people "failing up" are, in some cases, the Lebron James's of bamboozlement.
It's quite strange to see very capable people fall for such types, but it happens, I've seen it - and everyone around saw it except the very capable person.
There was a TGIF where prominent Search leaders (highest level of engineer, not management) openly asked Larry why we were being asked to compromise the quality of Google search to grow Google+ when GOogle+ was such a crappy and unpopular product. Larry just sort of lamely asked "can't you all get along" and then shortly afterwards, abdicated to Pichai (whose main skill was mainly to get all the SVPs to stop shivving each other in the quest to grow revenue). It was pretty clear that Vic had somehow convinced Larry through grima-style wormtonguing that social feed was the future for google, and Larry had fallen for it.
The difference being, there was no gandalf to come along and reinvigorate Larry.
So you can see why Eric, Larry and Sergey were afraid. They were worried that Facebook might ultimately do a search engine that somehow integrated social recommendations, and that'd be the end of Google. That fear was shared by other top execs like Hoelzle and Alan Eustace iirc. No wormtonguing was required. They convinced themselves of that thesis all by themselves.
In that environment lots of teams were trying to sprinkle social magic onto their product, often in hamfisted ways. The GMail team launched an ill-fated social network called Buzz that immediately upset lots of users who clicked through the consent popup without reading it and discovered that their address books were suddenly public. Maps was adding their own social features. Orkut was an actual social network popular in Brazil. But, none of these products integrated with each other in any way. They mostly even had their own separate user profiles! Like, there wasn't even one place to set a profile picture for your Google account. It was pretty disastrous.
Given that, some attempt at a unifying social layer was inevitable. Gundotra gets unfairly demonized in my view. Google+ was probably the best that Google could have done to compete with Facebook. It wasn't enough because it was a me-too product driven by corporate fear, and such products are rarely compelling. But it also wasn't terrible. Some users really liked it.