They could open source it and have other people use app engine if people want to use it. Otherwise if its open source people could implement what ever they want on the back end.
It says in the second sentence of the announcement that it was a "20 percent project" - basically, it was started by one or more Google engineers as a side project and developed into a full-fledged attempt to create a Google-based social networking site.
Second, wouldn't they rather put it up for sale?