Internet October 4, 2009, 8:30PM EST

Will Google's Wave Replace E-Mail—and Facebook?

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Since May, when Wave was introduced, developers have created hundreds of add-ons for the service, Rasmussen says. A handful, including some from software vendors SAP (SAP) and salesforce.com (CRM), have been tested but are not yet available to customers.

automatic voice-to-text

Only six apps are available to customers who are testing Wave. One, from Ribbit, lets users place Web calls to other users and create multi-user Web conference calls. It can also automatically transcribe voice into text. Ultimately it could sell for $2.95 to $19.95, depending on the features, says Ribbit CEO Ted Griggs. "Our hopes are pretty high," he says. "If Google Wave becomes a tool for collaboration, then being early to the game has a lot of value." In August, Ribbit and its owner, BT Group (BT), hired Kevin Marks, who led some of Google's developer efforts, to be its vice-president of Web services.

Done right, Google Wave has the potential to grab traffic and user time away from Facebook; AOL's AIM; e-mail services from Google, Microsoft (MSFT), and Yahoo! (YHOO); and even Skype and Cisco System's (CSCO) WebEx. An add-on from startup 6rounds turns Wave collaboration into a video conference, similar to Skype's. Users can communicate via Web video while editing documents or playing games on Wave. The company hopes to make money by selling virtual goods through its free app.

Another developer, LabPixies, could help Wave compete with online-gaming portals. Its free sudoku puzzle game allows for real-time competitive play. The company makes money through contextual ads, into which Google could potentially share. Google could also insert its ads into other free apps.

Marketing agencies, meanwhile, are already starting to look at how they could use Wave to grow their client companies' brands by sponsoring applications or allowing fans to share photos and chat. Just as brands are now paying attention to Facebook, Wave "is something everyone's got on their radar," says Dan Shust, director of emerging media at agency Resource Interactive, which works with such companies as Victoria's Secret, Hewlett-Packard (HPQ), and Procter & Gamble (PG). "The same thing might come true for Google Wave."

rival services expected quickly

A chief goal for Wave and its apps is to drive use of search, which can be done directly from the Wave service, and to boost sales of Google Apps, the suite of productivity tools that competes with Microsoft Office.

Search and e-mail rivals such as Microsoft and Yahoo are expected to unleash their own Wave-like products in response. "Microsoft and Yahoo will probably bring out something similar very quickly," Lindsay says. (Microsoft and Yahoo are mum on their product plans.) In a statement, Microsoft said: "While it is unclear how Google Wave will address critical needs and help consumers and businesses manage information overload, Microsoft already has solutions in place: for businesses, Office 2010 will span the PC, phone, and browser, enabling people to work when and how they want. For consumers, today over 500 million active users on Windows Live have the ability to communicate and share via popular services like Windows Live Messenger and Windows Live Hotmail."

Rasmussen says his team has already been approached by several companies looking to build their own Wave-like services and connect them to Google Wave so that users of different services can communicate with one another. "We have a vision of a future where there's a Google Wave, a Yahoo Wave, a Microsoft Wave, and they all inter-operate," says Rasmussen, who wouldn't say if Google has had discussions with Yahoo or Microsoft.

Early responses to Wave have been mixed, with some users questioning whether it enhances productivity and others saying it's overly complex. "The big question remains whether it enters the mainstream," says Laura Martin, an analyst at Soleil Securities Group.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.