(Updates with analyst’s comment in fourth paragraph.)
July 6 (Bloomberg) -- Facebook Inc., the world’s largest social network, is stepping up competition with Google Inc. by teaming with Skype Technologies SA to offer free video calls.
Facebook also said it has more than 750 million users, up from 500 million, in an announcement today at an event in Palo Alto, California, where it is based. Microsoft Corp., a long- time Facebook partner, is acquiring Skype in an $8.5 billion deal expected to close later this year.
Video chats can help Facebook fend off competition from Google, which introduced a social network with that feature last week, and offer an alternative to Apple Inc.’s FaceTime for the iPhone. Chief Executive Officer Mark Zuckerberg is using partnerships and media features to increase Facebook’s audience and avert user defections.
“You’re going to have more and more competition between Facebook and Google,” said Ben Schachter, an analyst at Macquarie Capital, in an interview on Bloomberg TV’s “Bottom Line with Mark Crumpton.” “The two companies are going to be battling it out for some time to come.”
Facebook also unveiled a multi-person chat feature that lets several people hold online conversations at the same time.
‘Cool New Scenarios’
“We’re using the best technology that’s out there for doing video chat with the best social infrastructure that’s out there in order to create some really cool new scenarios,” Zuckerberg said during a presentation at the event.
Facebook began holding talks with Skype about offering Web video calls on its social network in 2010, a person familiar with the discussions said earlier this year. An October update to Skype included voice calling between Facebook friends. Microsoft agreed to buy Skype in May.
“This is a really strategic long term deal between Skype and Facebook,” said Neil Stevens, vice president and general manager for consumer at Skype, in an interview with Bloomberg Television. “This isn’t just a one shot one deal implementation of a product. This is a long term relationship.”
Google’s new site, called Google+, includes Google’s maps and images, messages, comments and other content from selected groups of friends, as well as a video chat feature.
Microsoft, based in Redmond, Washington, invested $240 million in Facebook in 2007 and entered an agreement to sell ads on the social network.
Facebook is forging ties with other media and technology companies. It added Netflix Inc. CEO Reed Hastings to its board of directors in June and discussed incorporating more social features into the online video-streaming service. In March, Time Warner Inc.’s Warner Bros. studio announced plans to offer movie rentals on Facebook for $3.
Facebook is valued at $71 billion on SharesPost Inc., an exchange for shares of private companies.
--With assistance from Brian Womack in San Francisco and Cris Valerio in Palo Alto. Editors: Lisa Rapaport, Tom Giles
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