Facebook and Skype learn that it's good to talk

Silicon Valley is primed for an 'awesome' launch as the social-networking pioneer hits back at Google+, writes Stephen Foley

In the blue corner, the world's largest social networking site. In the red, yellow, blue and green corner, the mightiest search engine. Expect this one to go the full 12 rounds. Facebook just got hit with a vicious right-hook from Google, which launched a rival social network it calls Google+ and which early users say – with some surprise – doesn't suck.

But Facebook is readying a doozy of a counterpunch. If the Silicon Valley rumour mill has it right, it is about to launch video chat. Not satisfied with its 700 million users sharing every thought and every photograph with their friends, now Facebook hopes we will come to its site to connect face-to-face, too. The idea is to integrate the internet telephony pioneer Skype, with its 170 million regular users, into Facebook, making the social-networking leader even more useful (and, therefore, hard to leave) than it is already.

Here is what we know so far. Facebook sent out invites to a press event first thing yesterday with a logo featuring two chat icons. Skype, too, has been calling journalists offering them briefings. Last week, Facebook founder Mark Zuckerberg was in Seattle, home to Skype's new owner, Microsoft, which also owns a stake in Facebook, and said he would soon be "launching something awesome".

And Facebook has been deepening its ties with Skype for some months already. Facebook users recently became able to search their Skype contacts for potential new Facebook friends. For both sides, a full-on partnership is the next obvious step. The rumoured tie-up was first reported by the Silicon Valley blog TechCrunch.

Whether or not today is the day that video conferencing comes to Facebook, the social-networking pioneer is focused on getting as many people as possible to spend as much time logged in as possible and doing as many different activities on its site as possible. That way it has as many opportunities as possible to serve up lucrative adverts to its users – so that it can earn the profits to justify the putative $100bn (£62bn) valuation. The stakes are high.

A big new feature such as video chat could mean users spend significantly more time within Facebook, bringing a new growth spurt just as the growth in people joining Facebook has slowed down in major markets such as the UK and the US.

Mr Zuckerberg will also hope that users will fall in love with Facebook all over again, just as critics of its privacy policies seem to be getting an upper hand. Google, launching Google+ last week, went out of its way to attack Facebook and to point out ways in which its new social network gives users more control over who sees the things they share. Its big idea is "Circles", which allows you to group your friends into smaller categories (separating out work colleagues or relatives from close friends, for example) so that you can share certain items only with the individuals you really want to.

Vic Gundotra, the Google executive in charge of the project, said at the launch that "today's online services" – for which, read Facebook – "turn friendship into fast food, wrapping everyone in 'friend' paper, and sharing really suffers".

Google built its $160bn business by selling advertisements against anonymous search queries typed into its website, but it has been trying to encourage users to tell it more about themselves so that it can target more and better advertisements at them. It has allowed only a limited number of users to join Google+ while it tests and improves the service, and the artificial scarcity helped stoke something close to mania among the tech community in the days after its launch. That who's-in-and-who's-not chatter, plus positive early reviews for Circles and other features, suggests that Google+ may have more success than the company's previous attempts to crack social networking. Google Buzz, which tried to build a social network from the address books of Google's Gmail users, backfired last year when users complained the company had unilaterally publicised their secret and even illicit relationships.

In recent months it has also launched Google Offers, offering discounts at local businesses, and a service called Google+1, which allows users to rate and recommend traditional Google search results. Shelly Palmer, a technology consultant and author of Overcoming the Digital Divide, said Google+ has a lot to prove.

"I wouldn't count Google out," he said. "Every once in a while, these guys nail something, but they have not demonstrated awesomeness in this particular arena. If a feature works, Facebook will have it in 10 minutes. This is not going to be won by features alone now.

"If Google+ is a success, it may be because of Facebook's own arrogance and unwillingness to listen," he added. "I know a lot of people taking Facebook holidays, or deleting their profiles, or cutting back on what they do on the site. Facebook is social media on training wheels, but now we have got better at it and we are demanding more flexible tools, an ability to do things our way – something Facebook is not good at allowing us to do. Facebook could use some competition. At the moment, it has none."

A few months ago, you might have thought the social-networking industry was settling into a predictable pattern: Facebook for a catch-all service for sharing with friends, while there would also be niche services such as LinkedIn for professional contacts, Twitter for short messages and news, and (if you were feeling generous) MySpace for music.

The question is, will Google be satisfied if Google+ manages to be only a niche site? As Mr Palmer says: "If the answer is it has to go kick Mark Zuckerberg's ass, then this is going to be fascinating."