Facebook to Offer Video Calls Through Skype, Boosting Rivalry With Google

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.

To contact the reporters on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Facebook Introduces Free Skype Video Calls

Justin Sullivan/Getty Images

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.

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. Photographer: Justin Sullivan/Getty Images

5:10

July 6 (Bloomberg) -- Neil Stevens, vice president at Skype Technologies SA, talks about the company's partnership with Facebook Inc. to offer free video calls over Facebook's website. He speaks with Cris Valerio on Bloomberg Television's "Bottom Line." Bloomberg's Mark Crumpton also speaks. (Source: Bloomberg)

4:22

July 6 (Bloomberg) -- Scott Galloway, founder of L2 Think Tank and a professor at New York University, talks about Facebook Inc.'s plan to offer free video calls over its site through a partnership with Skype Technologies SA, and Facebook's competition with Google Inc.'s social networking site Google+. Galloway, a Bloomberg contributing editor, speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

5:53

July 6 (Bloomberg) -- David Kirkpatrick, author of "The Facebook Effect," talks about Google Inc.'s new social-networking service, Google+, and the possible impact on Facebook Inc. Kirkpatrick also discusses Facebook's partnership with Skype Technologies SA to offer free video calls over Facebook's website, Facebook's growth, and chief executive officer Mark Zuckerberg. He speaks with Emily Chang and Jon Erlichman on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

6:40

July 6 (Bloomberg) -- Benjamin Schachter, an analyst at Macquarie Capital, discusses the partnership between Facebook Inc. and Skype Technologies SA to offer free video calls on the social networking site. Schachter, speaking with Mark Crumpton on Bloomberg Television's "Bottom Line," also talks about Google+, the new social networking site from Google Inc. (Source: Bloomberg)

3:02

July 6 (Bloomberg) -- A.B. Mendez, senior research analyst at GreenCrest Capital Management, talks about Facebook Inc.'s announcement that it will offer free video calls over its site through a partnership with Skype Technologies SA. Microsoft Corp., a long-time Facebook partner, is acquiring Skype in an $8.5 billion deal expected to close later this year. Mendez speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)

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Facebook CEO Mark Zuckerberg

David Paul Morris/Bloomberg

Mark Zuckerberg, co-founder and chief executive officer of Facebook Inc., speaks during a press event at Facebook headquarters in Palo Alto, Californiaon July 6, 2011.

Mark Zuckerberg, co-founder and chief executive officer of Facebook Inc., speaks during a press event at Facebook headquarters in Palo Alto, Californiaon July 6, 2011. Photographer: David Paul Morris/Bloomberg