Apparently rumors are circulating that Google is looking to set up a social network called Google Me that will be a combination of Google Orkut, Profiles, and Buzz. It is supposed to be a Facebook killer. There is a team of Google employees working to finish the project according to rumors.

Rumors were spreading this weekend after Kevin Rose, founder of Digg, tweeted: “Ok, umm, huge rumor: Google to launch facebook competitor very soon ‘Google Me,’ very credible source.” The Tweet has since been removed, but others are entering the mix about the new network. Right now it is all speculation, but here are my thoughts.

This could be the next huge social network, since Facebook is having a number of PR challenges right now. First, they have messed up the privacy settings on the site more time than I care to remember. Additionally, they have a movie coming out shortly that chronicles their quick rise to success and also the downfalls of the business. The movie is based off the book The Accidental Billionaires: The Founding of Facebook A Tale of Sex, Money, Genius and Betrayal by Ben-Mezrich.

The only challenge is that while Google has developed almost everything else successfully they have never developed a successful social network. Google Video lost out to Youtube (whom they later acquired), Orkut is not popular outside of Brazil and India, Google Buzz has very little of it, and Google Profiles is a relatively unknown and incomplete social networking option.

Also, compound this by the fact that Facebook already has 500 million members and you have a huge reason for people to be a little reticent about switching networks. The great thing that Facebook has been able to achieve in a relatively short period of time is setting up a place where all of your friends, family, and associates are at the same place together online. That will be a tough hill for Google to climb to combat that.

At the same time, they are the only Web 2.0 company that can take on Facebook effectively right now. They have their tentacles in everything from search, analytics, and web tools to video, email, and pictures. Not having a huge role in social networking must be a huge thorn in their side and a gap in their plans for the future.

In the end, the main benefit will come to social networking users. While having one central location is great, it also limits the creativity of the leading network. A little competition with Google could be good for Facebook. Especially, since Twitter has been having their own challenges lately. Fail Whale anyone? That is a conversation for another time.

When I hear more about Google Me I will keep you informed. Right now there is just speculation from different sources online. There will either be an official announcement from Google about the network shortly or they will dissipate the rumors. Either way it should be interesting.