Google games pit search giant against Facebook

Google is spoiling for a fight with Facebook over the fast-growing market for online games, part of the search engine giant's latest attempt to build a social networking business.

The move would pit two of Silicon Valley's most powerful companies against each other.

Google is believed to have opened talks with several of the games developers that have come to prominence on Facebook, where millions of users play simple social games such as FarmVille and Mafia Wars.

Eric Schmidt, Google's chief executive, yesterday stoked talk about a push in social networking by promising that any Google service would be different from Facebook: "The world doesn't need a copy of the same thing."

Google gets $28bn (£18bn) a year in revenues from selling advertising alongside search results, but faces questions about whether and how to diversify. Internet users are spending more time in social networking sites, and linking to outside web pages from there, potentially cutting Google searches out of the equation.

Facebook, which is privately owned, celebrated the sign-up of its 500 millionth user this month. Its revenues have grown substantially, in part because it takes a 30 per cent cut of any sales generated by the games users play on its site.

And games developers have become some of the hottest properties in the technology industry, thanks to the popularity of so-called "social games" which can be played between members of social networks.

Google has already made an investment in Zynga, which makes FarmVille, whose 60 million users run their own virtual farms, and is also reportedly in talks about partnership deals with other developers, including Playfish and Playdom. Disney agreed this week to pay up to $763m to acquire Playdom, the maker of Sorority Life, in which users can pay to dress up their avatar and take her to online parties.

Google hopes to lure games developers to build its new social networking platform, which Silicon Valley rumours suggest will be called Google Me.

Reached by The Wall Street Journal, Mr Schmidt declined to indulge in anti-Facebook rhetoric, saying the social networking site's growth had been good for Google since it encourages more internet use. "Facebook users use more Google products than any other users," he said.

Shelly Palmer, a technology consultant and founder of Advanced Media Ventures, said that Google need not feel threatened by Facebook – but it ought not to think that cracking social networking is easy, either.

"Google is trying to understand what its capabilities are. Experimentation is part of its culture. It sees that there are a frightening number of people playing Mafia Wars and it says, 'You have got to go fishing where the fish are.' Now it is trying to answer questions like whether there is a business there. If they are not asking these questions, they are not doing their job," he said.

Google Me is expected to amount to a relaunch and extension of Google Buzz, the social network launched by the company at the start of this year but with disastrous public relations consequences.

It had hoped to create a vast social network from scratch by harnessing the 180 million users of its Gmail email service, converting parts of their contacts lists into Facebook-style "friends" who could share status updates, pictures and links. But users revolted when they realised that their contacts could now see who they had been emailing – something that could reveal everything from private business relationships to romantic affairs.

Google will need to navigate its growth in social networking carefully, amid growing concerns over the amount of data that the company already collects on its users. Facebook, too, has been facing persistent criticism on privacy issues. Both companies sent representatives to a Senate commerce committee hearing on Tuesday which is considering the need for new laws to safeguard personal web browsing history and other online information.