As Facebook and Google seek to outdo each other, can smaller firms find a space for themselves?

FACEBOOK SOUGHT to seize the initiative from Google this week, by announcing something “awesome” to match the search engine’s sneak preview of its Google+ social software. In the end, the something “awesome”, introduced by Mark Zuckerberg himself, was largely group and video chat.

Was it awesome? Well, it’s not the sort of thing that sets the technorati on fire. “Isn’t this what AOL had in 2004?” was the template for their sarcastic response. But that doesn’t necessarily mean it’s not significant.

Video chat has been hovering on the fringes of usability for some time: even Apple has struggled to make it accessible to the average user. Facebook, which has reached the milestone of 750 million active users, connects families who may not have been able to use Skype (which provided Facebook with the technology) or other video chat systems.

But what stood out at the press conference was the elephant in the room.

Zuckerberg never referred to Google by name, but seemed to circle the topic.

After listing the capabilities of other companies, he threw in “search” almost as an afterthought.

When he explained why others should be building on Facebook’s infrastructure, he said Facebook believed “individual entrepreneurs or entrepreneurs that focus on one specific thing will always do better than a company that’s trying to do a million different things”.

Curiously, that line echoes what Google’s founders said in the early days of their company: “It’s best to do one thing really, really well.” It was one of the “Ten things we know to be true” that still lie at the core of what Google does (one of the others was the infamous “don’t be evil” adage).

So who wins in this battle? Will Google win, despite the fact that it is reaching into an area in which traditionally it has not done very well at all – social software? Or will Facebook win, despite the fact that it needs to invite and keep dozens of other companies within its own private ecosystem?

It’s impossible to say, but I will say that there has been more excitement in the social networking space in the past two weeks than I’ve seen in the past year.

After a period of extreme growth in social networking, pioneered by Facebook and echoed by Twitter and companies such as Spotify and LinkedIn, it seemed like we were entering a gentle decline.

Each company appeared to be reaching the limits of its capabilities to innovate and was becoming happy to occupy its own niche. Now that’s changed.

Zuckerberg referred to the “launch season”, implying that the company would have more announcements in the next few months.

It seems clear that Google is planning announcements at a machine-gun pace for the next few weeks and perhaps months.

Apple will launch iOS 5 this autumn, with Twitter integration. Spotify will be reaching into the US market.

LinkedIn’s March initial public offering price is still going strong, and the billions it brought the company will need to be spent soon.

Social networking sites have become, for the majority of internet users, ubiquitous. The transformation from an oddity to a fad to a background assumption happened as quickly as it did for e-mail and the web.

But what happens next is the fascinating part. Up until the last few weeks, the assumption was that the next few developments would be entirely generated by Facebook and its satellite companies.

Now it seems that the infrastructure is more unstable than that; companies may be drawn away from Facebook to orbit Google’s offerings. Facebook will have to come up with better terms to draw them back.

There’s a part of me that’s sad that it’s come to this: a battle between internet giants, rather than a sudden Cambrian explosion of small companies seizing the crown.

During all the hoo-hah, nobody recalled one of the first groups to suggest implementing something like the circles in Google+: Diaspora, the peer-to-peer Facebook competitor.

Similarly, when Facebook announced Skype was providing its video chat infrastructure, few people recalled that what drives that company’s technology is its users sharing their bandwidth to keep Skype’s data flowing.

We’re happily throwing all our personal data into huge silos kept by third parties.

It’s migrating off our personal computers into domains controlled by large companies. At least two of those companies, Facebook and Google, offer their services free to the end user. That sounds like a good deal, until you start asking who their real customer is.

People may trust Google more with their data than Facebook, but they aren’t necessarily correct in that trust.

The net is becoming more centralised.

It’s drifting away from its roots as a person-to-person network towards a person-to-person-via-giant-internet-conglomerate.

But maybe, just maybe, while the giants fight each other, there’ll be a chance for a few small mammals to get a piece of the action – and run with it just as Larry Page and Sergey Brin, Zuckerberg and Evan Williams did so many aeons ago.