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RealTime IT News

Microsoft Into Social Networking, Too

UPDATED: Perhaps feeling a little left out of the lucrative social-networking space, Microsoft announced a joint venture with Wallop to get in the game.

The start-up is the fruit of Microsoft's IP Ventures program, which the company uses to connect its R&D department to the venture capitalist (VC) community.

Microsoft will own a minority stake in Wallop and hold an observer's seat on its board.

VC firm Bay Partners put down the cash for Wallop, and entrepreneurial veteran Karl Jacobs will take the start-up's top executive job.

Wallop faces stiff competition from such veterans as MySpace and Facebook.

Last week, VC firm Greylock Partners helped Facebook through its third round of funding with $25 million after rumors of a $750 million acquisition bid from Viacom.

In 2004 News Corp. paid $580 million for Intermix Media, which brought MySpace into its fold. Since then, the popular social-networking site has experienced explosive growth and controversy.

But Wallop will differentiate itself both with its technology and business model, Jacobs told internetnews.com.

Departing from the friend-of-a-friend social model, Wallop will instead use algorithms that respond to social interactions to automatically build and maintain a social network.

In addition, Jacobs said, the social-networking site will not be ad-supported.

Much of the buzz surrounding the success of Facebook and MySpace is amplified by the fact that the sites attract the malleable 18- to 24-year-old market advertisers crave.

Many argue that it's the sites' lock on youth that draws old media like Viacom and News Corp. with its big bucks.

Jacobs doesn't want to hear it.

"That's all predicated on the fact that advertising is the only business model that will work in this space," he said. "In my opinion that isn't true."

In other Microsoft news, the Wall Street Journal today reported that the company will acquire Massive Inc. for an estimated $200 million to $400 million.

Massive is a start-up specializing in placing advertisements inside video games.