Microsoft to Build a ‘MySpace’

The software giant launches a new social networking site and updates its Internet Explorer browser.

Microsoft said Tuesday it has created a new social networking technology company called Wallop and updated its Internet Explorer web browser, as the software giant seeks to expand its presence in the online market, where the company seems to be fast losing its relevance.

Wallop will be a spinout of Microsoft Research, the research and development division of the world’s largest software maker. Microsoft will hold a minority stake in the company. The startup will be headed by Karl Jacob, a Silicon Valley veteran who has been a partner with venture capital company, Bay Partners, which also provided the Series A financing.

The social networking company will launch its product later this year.

Microsoft has been sketchy on the details about Wallop. But the Redmond giant said Wallop will solve some of the problems current social networking technologies sites face and will introduce a new way for consumers to express themselves online. Wallop will have a better user interface that will help make it easier for online patrons to connect with each other, said Microsoft.

“Our access to industry-leading technology through the IP Ventures program has led to a golden opportunity for Wallop to change the face of social computing with differentiated technology and unprecedented support,” Wallop CEO Karl Jacob said in a statement.

Wallop was launched through Microsoft’s IP Ventures program that lets venture capitalists, entrepreneurs, and small businesses access Microsoft innovations and build on them. The IP Ventures program is closely integrated with Microsoft’s emerging business team to provide resources to the VC community on ideas that might be incubating in the program.

Social Networking has become a busy market crowded with a number of players. The grand daddy of them all, MySpace has 67 million members, 90 percent of whom are in the United States. A quarter-million new members are added every day. MySpace competitors include Bebo, which has themed profile templates, myYearbook, Facebook, Tagged, Tagword, and Xuqa (see The MySpace Wannabes).

Still Microsoft could offer something new, said Mike Arrington, who runs the popular blog, TechCrunch.

“I’ve seen a bit of what they plan to offer, and I’ll say that this is not another ‘me too’ social network offering,” said Mr. Arrington. “And there are a number of unique business model twists that they aren’t announcing yet.

Battling for the Browser

Microsoft has been making other moves too to regain its competitive edge in the online market. On Wednesday, the company released the second test version of its upcoming browser, Internet Explorer 7.

The latest version of IE 7 sports beefed up security and additional features that could raise the pressure on rivals Firefox and Opera that have so far led innovation in the browser market.

IE 7 will offer users features like automatic detection of RSS (Really Simple Syndication) feeds, tabbed browsing that lets users group multiple sites in a single browser window, and page zoom that can enlarge individual web pages.

Microsoft is encouraging the public to download the test version and try it out. Analysts like Joe Wilcox of research firm, JupiterResearch, said despite Microsoft’s efforts, users have to keep in mind that it is still only a test version.

“Microsoft may have done a very splashy release in terms of marketing but it is still a beta product,” he said.

Still, the Redmond giant has pulled out all the stops to offer things like free phone support that competitors cannot. “You are not going to get this kind of stuff anywhere else,” said Mr. Wilcox.

Though Microsoft retains more than 85 percent of the market share with its Internet Explorer browser, the company is competing against a host of fast growing startups like Maxthon, and Avant, and old hands like Opera, and Firefox (see Browsers Battle Over Users).

Firefox, for instance, has emerged as one of Microsoft’s strongest competitors, gathering more than 10 percent of the market share in less than two years.

Microsoft plans to release IE 7 later this year but analysts like Mr. Wilcox said it is likely that the company will get it out along with its upcoming operating system Vista. After much delay, Vista is scheduled to be out in January 2006.