Facebook has over 500 million users

If, as anticipated, Mark Zuckerberg’s firm launches a Facebook search engine that prioritises results around the known preferences of a user’s circle of friends, then the commercial potential of social networking would be greatly extended.

Google has more than two-thirds of the search market, and there is little doubt it is taking seriously the threat of Facebook, which has more than 500 million members but lacks business-orientated, revenue-generating services.

Last week, Google announced plans to raise salaries by 10% next year for all employees, interpreted as an effort to staunch the loss of top staff to rivals.

“They don’t have an absolute lock on the top talent anymore,” analyst Colin Gillis of BGC Partners told Reuters. “Facebook right now is accumulating top talent and it’s harder for Google to retain people.”

As social networking continues to challenge the power of search on the web, the moment may come when Facebook decisively threatens Google’s control of $24bn in annual search advertising revenue.

Google itself denies it is building a social networking platform to compete with Facebook. Instead, chief executive Eric Schmidt says it plans to add “layers” of social networking to its products.

Last night, Facebook continued to deny the reports that its email application will be launched at Monday’s media event where Zuckerberg is scheduled to speak.

“We don’t comment on speculation about future products,” a spokesman said.