The war between Google and Facebook is heating up: Google just made one small tweak to its Terms of Service that will have a big impact on the world’s biggest social network. From now on, any service that accesses Google’s Contacts API — which makes it easy to import your list of friends’ and coworkers’ email addresses into another service — will need to offer reciprocity. Facebook doesn’t, so it’s going to lose access to this key piece of the social graph.

So what does that mean in layman’s terms? When you initially sign up for Facebook, you’re run through a series of prompts asking you to enter your Google account information so that Facebook can import the email addresses of your contacts. This is a very powerful feature because it helps new users instantly connect with dozens of their friends. And Google is turning it off, because it thinks Facebook isn’t playing fair.

You see, Facebook has never allowed users to export the contact information of their friends. This has been a gripe against the social network for years, because there’s never been an easy way to pick up and leave Facebook with your own data in tow. But what, you say? Didn’t Facebook just launch a new feature that lets you download your information?

Yes and no. The feature lets you download content you’ve uploaded — photos, wall posts, videos, events, and messages. But the export feature leaves out the most valuable set of data: your contacts. Yes, Facebook will give you a list of their names, but it doesn’t attach any contact information: you don’t get their email address, phone numbers, or anything else another service could use to rebuild your social graph somewhere else.

Here’s the relevant addition of the Terms of Service for the Contacts API:

5.8. Google supports data portability. By accessing Content through the Contacts Data API or Portable Contacts API for use in your service or application, you are agreeing to enable your users to export their contacts data to other services or applications of their choice in a way that’s substantially as fast and easy as exporting such data from Google Contacts, subject to applicable laws.

A Google spokesperson gave us this statement:

Google is committed to making it easy for users to get their data into and out of Google products. That is why we have a data liberation engineering team dedicated to building import and export tools for users. We are not alone. Many other sites allow users to import and export their information, including contacts, quickly and easily. But sites that do not, such as Facebook, leave users in a data dead end.

So we have decided to change our approach slightly to reflect the fact that users often aren’t aware that once they have imported their contacts into sites like Facebook they are effectively trapped. Google users will still be free to export their contacts from our products to their computers in an open, machine-readable format–and once they have done that they can then import those contacts into any service they choose. However, we will no longer allow websites to automate the import of users’ Google Contacts (via our API) unless they allow similar export to other sites.

It’s important that when we automate the transfer of contacts to another service, users have some certainty that the new service meets a baseline standard of data portability. We hope that reciprocity will be an important step towards creating a world of true data liberation–and that this move will encourage other websites to allow users to automate the export of their contacts as well.

Facebook has claimed in the past that there are sensitive issues around exporting contact information. But that hasn’t stopped it from pulling in whatever data it can. And it has also forged deals with both Hotmail and Yahoo that will let those services access its contact data. Google didn’t do a partnership with Facebook, so it doesn’t get the goods.

This one-way flow of contact data isn’t only impacting Google, either. Earlier this year Twitter launched a new feature that would allow users to see which of their Facebook friends were also on Twitter. After some initial confusion over what was going on, Facebook simply blocked that functionality (apparently over claims of too much API usage), which was pretty ridiculous. Months later, the feature is still disabled.

Which brings us back to why Google is doing this. Facebook has become a major threat to Google because of its exclusive ownership of the social graph (even if it allows other sites to access it via Connect, all roads go through Facebook). It doesn’t make sense for Google to die by its own sword, so it’s going to take the press hit that comes from this change so that it has better footing in the battle over social.

And yes, there will be a backlash. Google has long benefitted in the press from its promises and promotion of openness. This is a move toward being more closed, though Google is positioning it as a strategy to help make the web more open in the long-term. That may ultimately prove true, but the underlying motivation is clear — this is all about competing with Facebook. And it sets an ugly precedent: if Google feels threatened, it will tweak its degree of openness accordingly. It certainly wouldn’t be the first company to do so, but its shield of ‘Open’ is getting some deep cracks. That said, Google does still let users download their contact data (which Facebook doesn’t do at all), so it’s hardly locking users in here. It’s just making the process to get your Google data onto Facebook more involved.

So what does Google want from Facebook? Their definition of reciprocity requires that any service accessing its Contacts API offer an API of its own with similar functionality. This means it wants an API that it can access programmatically, without requiring the user to download and then re-upload a spreadsheet of contact data. Sources close to Google tell us that this policy will be policed on a case-by-case basis. In other words, it’s highly unlikely that Google is going to go around verifying that every startup to access its Contacts API also has an export API of its own — they’re just going to go after the big offenders.

This won’t spell Facebook’s doom — not even close. Facebook can pull in data from other email providers like Yahoo and Microsoft’s Hotmail, and it already has a massive amount of information that’s been imported via existing users. It also acquired a company called Octazen that, from what we’ve heard, is an elite team of professional data scrapers and contact importers. Now that it has contact information from 500 million users, my hunch is that Facebook can simply ask for your Gmail email address and connect you to dozens of contacts without even needing to access Google’s API.

And, if it really came down to it, Facebook has one other way to get Google’s contact data. Google is going to still allow users to download their contacts in a spreadsheet — Facebook could simply ask users to upload that file.

We’ve reached out to Facebook for comment and are waiting to hear back.

Google To Facebook: You Can’t Import Our User Data Without Reciprocity

I’ve had an interesting few days trying to track down exactly what is and isn’t going on with Yahoo and Groupon.

One source earlier this week said that a $1.7 billion acquisition was all but done, but Groupon’s management team balked and killed the deal. That’s certainly juicy and consistent with Yahoo’s failure to acquire Yelp and Foursquare.

Another source close to Yahoo said much the same thing, but suggested the price was higher, north of $2 billion.

None of it adds up though. Groupon was valued at $1.35 billion earlier this year. A sale in the $2 billion range would mean that Groupon sees a major problem in their business model. Otherwise, they’d be in it for the long haul.

And in fact the information from these two separate sources is probably incorrect. A source close to Groupon tells me that there haven’t been any serious acquisition discussions with Yahoo at all, and for Groupon to even consider an acquisition would require $3.5 billion or more. Clearly, Yahoo would have a lot of trouble completing an acquisition of that size.

Also, we’ve checked with some of the other usual suspects who’d likely be bidding against Yahoo in a Groupon acquisition. They’ve not heard a thing.

We have confirmed that Groupon and Yahoo are working on a large distribution deal of some kind. A smaller deal is already in place, but something much bigger is coming in the next few weeks. Deals with eBay and Citysearch are probably also being signed.

But for now, no acquisition. Either because discussions never happened (most likely) or because Groupon management balked at being part of Yahoo.

Getting To The Bottom Of The Crazy Yahoo-Groupon Rumors

Oh Quora! You’ve done it again. This time with the utterly fascinating “What startups have been started by former Yahoo employees?” thread which provides a pretty comprehensive list from AClevertwist.com to Ycombinator.com (Quick, some ex-Yahooer start a Z-word startup!) of startups founded by former Yahoo employees, which, as we’ve already pointed out, are a force to be reckoned with.

Inspired by the sheer scope of Yahoo defector startups (Hunch! Ycombinator! Tunerfish! Tinyspeck! Onetruefan!) we and the folks at Pearltrees are working on the above visualization, which currently runs through “M.” So go ahead, click on one of the nodes and explore the ever expanding house that Y! built.

Startups Started By Former Yahoo Employees [Graphic]

Google has Google Instant. Bing has guided search and (soon) swimming whale videos on its home page. Yahoo, well, Yahoo now has an expanding accordion search box. Starting today, when you do searches related to music, movies, or news, a set of results will be packaged together at the top in a box with vertical tabs along the side. It is similar to Google’s Universal Search Onebox and the Bing Box, except that the vertical tabs create four or five expanding search boxes in one.

When you do a search for “Lady Gaga,” for instance, the default box is an overview with an excerpt from her bio, link to her official site, and photos, but there are also tabs for nearby events, albums, videos, and Twitter. The Twitter tab is further divided into her official Tweets, Tweets from Hollywood Insiders, and Tweets from “Everyone” (although it is not really from everyone, Yahoo filters out spam and bots).

Similarly, for news, the tabs are divided into stories, images, videos, and Twitter. And for movies, you get an overview with links to trailers, and a tab with showtimes near you. Yahoo also has a partnership with Netflix to link directly to that movie on Netflix, where it can be added to your queue. (Yahoo won’t get paid for each movie that people add to their Netflix list, but will get paid a bounty for new members who sign up for Netflix). These tabs will also be for sale to search advertisers who may want to sponsor one.

If you do a search for a trending search topic, chances are you will get a slideshow in the search box, along with photo sand information. (Yahoo loves search-generated slideshows). Yahoo is also adding slideshow results to its image search. The top result will now often show a box with related slideshows from different public domain image banks such as Flickr.

Finally, Yahoo’s mobile search is adopting HTML5 so that it can show better looking tabs, image search results, and stock charts when applicable.

Yahoo And The Incredibly Expanding Accordion Search Box

Most recently in the news for its executive exodus last week, Yahoo announced on its corporate blog earlier today the acquisition of San Francisco-based Dapper, a startup that specializes in fancy contextual display ads, i.e. ads that take what is happening on a content producer’s website as a cue for what to serve up to a viewer.

Both Yahoo and Google have been working on optimizing contextual display ads for quite some time, and this recent acquisition is Yahoo’s attempt to harness the talent at Dapper, which has also figured out a realtime bidding feature for ads. This is the first Yahoo acquisition since the triumvirate of Koprol, Associated Content and Citizen Sports in May.

From the Yahoo blog:

“Yahoo! is already the largest and most successful force in display advertising, but the strategic addition of Dapper will enable our advertisers and agencies to quickly and easily build dynamic ad creative, leveraging data to automatically show the right product, offer, or message with each impression.”

Dapper has received $3 million in financing from Accel Partners among others, and it’s worth noting that Former Yahoo’er Amit Kumar was formerly product manager at Dapper and currently sits on the Dapper board.

The terms of the acquisition were undisclosed, but we’re guessing the acquisition price was relatively small, between $20 -$30 million. Yahoo stock rose 2.31% today, trading at $14.61 by NASDAQ’s close.

Yahoo Nabs Display Ads Startup Dapper