msft

After all the ink spilled last week over Microsoft (NASDAQ: MSFT)'s investment in social-phenom Facebook (see Peter Cohan's interesting piece on Facebook's valuation), search giant Google (NASDAQ: GOOG) is countering today with an interesting announcement: It is creating a distribution network for social networking tools.

You ask: A what?

Part of what makes Facebook's social networking environment interesting is that it's become a platform for software development. Like Salesforce.com (NYSE: CRM)'s developer network, Facebook provides a platform, complete with tools, that allows third-party applications to be deployed within the Facebook milieu. Applications like iLike (with over 6 million registered users, 300,000 news users per day and a management team that rivals the U.S. Olympic basketball team) allow software developers to reach and interact (and eventually make some bling) with Facebook users within the Facebook environment.

Google also has third-party tools, deftly describes as "widgets." Like Facebook, Google provides a platform for third-party developers to build applications that reside within users' personalized homepages (iGoogle pages in Google parlance) and -- just announced recently -- on those publisher sites that work with Google's cash cow advertising platform, AdSense.

So, what's the news? Google is courting Facebook developers to the Google platform, now dubbed OpenSocial, complete with tools, a management interface and most importantly, a unified software toolset that Google will ensure is compatible with all the sites within its network. In other words, Google is trying to attract Facebook developers, luring them with access not just to the Google family of websites but to a distribution network to the millions of other sites marketing Google's text link ads.

And there is where Google will trump Facebook. Location (#1), Location (#2), Location (#3).

Where Facebook, as big and sticky as it is, can reach users only within its platform (in essence, Facebook is creating its own microcosm of the internet), Google's reach is enormous. With millions of publishers on its ad platform, Google has the ability to reach internet users everywhere they exist. And now, with a platform to push out third-party apps on its partner network, Google is poised to trounce Facebook's semi-closed garden.

It's definitely getting interesting.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
Author owns Google as of 10/31/07.