FORTUNE -- A little less than two months after Google launched its fledgling social network, Google+, Silicon Valley's latest rivalry is heating up.
Google+ (GOOG) launched in June with an innovative group video chat dubbed Hangout. One week later, Facebook announced a video chat feature of its own in cooperation with Microsoft's (MSFT) Skype. Last week, Google announced that games like Zynga Poker and Angry Birds would find a home on Google+. A day later, Facebook unveiled a slew of improvements to its games platform, including a newsfeed-like live ticker with game updates and higher-resolution gaming.
If it wasn't clear before, it is now: Facebook chief Mark Zuckerberg is paying very close attention.
At an event last week, Facebook director of game partnerships Sean Ryan had some choice words for his new competitor. "Google has emulated aspects of our system, which is what they have the right to do," he said. "We just need to be better." He's referring to the way the companies make money from casual online games like Farmville and Words With Friends. Players pay for play time or virtual goods within the games, and the social networks take a cut of the sales. Currently, Facebook reportedly takes 30% from game developers, whereas Google takes just 5%.
The similarities between the two models have obviously ruffled some feathers. At the event, Facebook's Ryan argued that Google's gaming foray was like McDonald's (MCD) recent efforts to offer premium coffee, competing in the same space as Starbucks (SBUX). (That business went on to become huge for McDonald's...) "Google is at 5% because they don't have any users," he said dryly. Google declined to comment on the statements, but confirmed the percentage it planned to take from game makers.
There's good reason for the two technology giants to see games as a new front in their tussle for social users. The global virtual goods market -- arguably the largest revenue stream for casual games makers -- is expected to more than double to $20.3 billion by 2014 according to research and investment bank ThinkEquity. Jeremiah Owyang, a principal analyst for Altimeter Group, notes that it is also a way to reach a coveted demographic. "When we saw casual gaming growth, it was amazing to see that the most common gamer was a middle-aged woman in the Midwest, and there's a lot of advertising dollars associated with that," he says.
But according to Owyang, both services have their work cut out for them. Google+ is off to a good start, but he doesn't think a compelling reason exists yet for mainstream users to switch over from Facebook. That's why the company announced it was going after casual games, to attract new users. Meanwhile, Facebook needs to be less reactive to Google+'s announcements and become more aggressive, he says.
With an estimated 25 million registered users, Google+ has a long way to go before it catches up to Facebook's 750 million users. What's clear is that both companies are likely to continue watching each other's moves closely.
Customers have moved to the digital realm -- but big-brand advertisers are following reluctantly.
By Stacy Cowley, CNNMoney tech editor
FORTUNE -- There's a disconnect between big brands and their customers. People are spending more and more time online and on their gadgets, but advertisers remain wary about shifting their spending into the digital realm. Internet analyst turned venture capitalist Mary Meeker estimates that there's a $50 billion gap between where the money MORE
Jul 20, 2011 5:19 PM ET
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*All Things D reports that daily deals site Groupon wants that initial public offering (IPO) to happen sooner rather than later -- and by "sooner," we mean as early as this week. Regardless of when ever it does go public though, the company could be valued at $15 billion-plus. MORE
JP Mangalindan, Writer-Reporter - May 11, 2011 6:30 AM ET
A curated selection of the weekend's most newsworthy tech stories from all over the Web. Sign up to get the newsletter delivered to you everyday.
Former CNN and Time magazine exec Walter Isaacson is working on the first authorized Steve Jobs biography ever, entitled "iSteve: The Book of Jobs," which hits shelves and e-bookstores early next year. Isaacson reportedly has unprecedented access to pen the opus, including interviews with Jobs, members of MORE JP Mangalindan, Writer-Reporter - Apr 11, 2011 5:00 AM ET
A curated selection of the weekend's newsworthy tech stories from all around the Web. Read on, and join the conversation with a comment below.
"We learned that you can't rely on anyone else to control and maintain your own brand."
-- Groupon CEO Andrew Mason on its controversial Super Bowl ad. (Ad Age)
Photo: Engadget
AT&T plans to buy T-Mobile USA for $39 billion, a deal that would make the former the MORE
JP Mangalindan, Writer-Reporter - Mar 21, 2011 5:00 AM ET
Why Zynga's casual gaming is minting money and hooking so many people -- including yours truly.
The author's expanding community in CityVille.
I'm taking a break.
Right about now, I take a few minutes to harvest crops, put up several small businesses, collect rent, and hire Facebook friends to work at community halls. That's because last month, I joined the legions on CityVille, the city-building simulation game from Zynga MORE
JP Mangalindan, Writer-Reporter - Mar 14, 2011 3:17 PM ET
Every day, the Fortune staff spends hours poring over tech stories, posts, and reviews from all over the Web to keep tabs on the companies that matter. We've assembled the day's most newsworthy bits below.
Less than an hour after TV media like Anderson Cooper and Dr. Phil accused Amazon of "peddling pedophilia" for recognizing and selling a pedophile "how-to" guide on Amazon's Bestsellers list, the ecommerce site pulled it from its MORE JP Mangalindan, Writer-Reporter - Nov 11, 2010 6:00 AM ET
The online gaming industry sells $2 billion a year in virtual goods through micro-transactions. What if they sold newspapers?
By John Patrick Pullen, contributor
The Internet is an emporium of inequity. For example, in the massively popular social game Farmville, a little garden gnome will run you 13 Farmville Bucks, which converts, roughly, to $2.75 USD. Over on Kingdoms of Camelot, another successful game hosted on Facebook, the gauntlet of MORE
Aug 5, 2010 3:00 AM ET
Gaming is already wildly popular. A recent spate of deals with Google, Disney, and Gamestop, suggest that social games have the promise to be wildly profitable, too.
by Patricia Sellers and JP Mangalindan FarmVille. Mafia Wars. Pet Society. With their collective userbases numbering in the hundreds of millions, social gaming is as ubiquitous and mainstream as primetime TV programming.
But for years that wasn't the case -- skeptics disregarded social games, MORE
Jul 29, 2010 10:13 AM ET
The personal injury law firm that sued Facebook and Zynga is now gunning for Apple
Here come the lawyers.
Less than a week after the release of the iPhone 4 -- and the first complaints of reception problems -- a Sacramento-based law firm has begun soliciting clients for a possible class-action lawsuit against Apple (AAPL).
"If you recently purchased the new iPhone and have experienced poor reception quality, dropped calls and weak signals," MORE
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