Google Girds for Facebook Fight

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For Google, OpenSocial is the first step in a plan to hit back at Facebook and Google's chief rival, Microsoft (MSFT), which on Oct. 25 announced a $240 million investment in Facebook (BusinessWeek.com, 10/25/07), beating out Google for a stake in the fast-growing company, now worth an estimated $15 billion. So far, the companies haven't made any announcements about technical integration of their software, though Microsoft has said it's helping Facebook with technology that could turn the social network's data on members' names, connections, and tastes into user directories that are accessible by business software programs.

David to Google's Goliath?

Facebook could encroach further on Google's turf: It's rumored to be working on an advertising network it will announce Nov. 6 in New York. At the Web 2.0 conference in San Francisco earlier this month, Facebook CEO Mark Zuckerberg said the company is interested in applications related to online ads.

"One of the next transformative uses of the Net is through the relationships embodied in your social network," says Reid Hoffman, co-founder and chairman of LinkedIn, which on Nov. 2 plans to release an application programming interface that will let developers create applications that leverage users' LinkedIn networks on other sites. OpenSocial is "an indirect shot" at Facebook, says Hoffman, an early Facebook investor. "It means that there isn't just one social platform on the Web."

Facebook is amassing a wealth of data on its 50 million users' social connections, ages, tastes, and shopping habits, thanks in part to the site traffic spurred by popular third-party applications from companies such as Slide and iLike. In a Web advertising market where finely slicing segments of users is key, the social networks' storehouses of data on users' demographics and online behavior could be a boon to advertisers, which are warming to the sites. "If the rumors are true and Facebook is about to launch an ad network, that would be a huge step for the industry," says Andreessen. "Advertising that's super-targeted is incredibly useful."

Google's Expansion Hopes

Google already has a foothold in the market for social networking ads. It serves advertisements to users of MySpace as part of a $900 million deal put in place in 2006. On Oct. 17, MySpace said it would make data on relationships among its 110 million users available (BusinessWeek.com, 10/18/07) to outside developers and share revenue from related advertising with them.

With OpenSocial, Google hopes to extend its presence on the social Web. A critical first step will be convincing outside software makers to embrace its approach. "To the extent that OpenSocial has elements that allow us to make money, it will be more attractive," says Keith Rabois, vice-president of strategy and business development at Slide. "To the extent it doesn't, Facebook will be more attractive. That's a key element that drives any venture-backed business."

Ricadela is a writer for BusinessWeek.com in Silicon Valley .