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April 26, 2006

Microsoft spins out Wallop

Posted by David Hunter at 1:05 PM ET.

Press release:

Microsoft Corp. today announced the spinout of a new social networking technology, developed by Microsoft Research, to create a new Silicon Valley startup, Wallop Inc. Wallop, whose aim is to deliver the next generation of social computing, is led by experienced entrepreneur and CEO Karl Jacob, with 30-year veteran Bay Partners providing Series A financing.

Microsoft IP Ventures will celebrate its one-year anniversary next month. “We’re excited by the interest it has attracted with entrepreneurs and the venture capital community,” said Eric Rudder, senior vice president of Technical Strategy for Microsoft. “Microsoft has one of the world’s preeminent R&D labs, and we are committed to getting our innovations into the hands of entrepreneurs. This deal is another great example of Microsoft working with the right team to get this next-generation technology into the marketplace quickly.”

There’s more there and from Microsoft’s Don Dodge about the Microsoft IP Ventures program where Microsoft licenses technologies they have no immediate commercial use for to entrepreneurs. It’s more than just patent licensing though – in this case, Microsoft took a stake in the company.

As for Wallop itself, it’s yet another of the social networking sites like MySpace that hopes to attract eyeballs and presumably thereby sell advertising. Micahael Arrington notes that the current mywallop.com is not what the ultimate site at wallop.com will look like and:

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. And there are a number of unique business model twists that they aren’t announcing yet. The launch is scheduled for this summer. One interesting thing to note: the current Wallop site is all-Flash. hmmm.

Arrington has more on the Wallop CEO, Karl Jacob, as does the press release.

I continue to retain my skepticism about the business aspects of the cloud of Web 2.0 social networking fluffiness exemplified by MySpace and its ilk. Per the press release:

Launching later this year, Wallop solves the problems plaguing current social networking technologies and will introduce an entirely new way for consumers to express their individuality online. For example, today’s social networks have difficulty enabling people to interact in a way similar to the way they would in the real world. Wallop tapped legendary Frog Design Inc. to conceive a next-generation user interface enabling people to express themselves like never before. In addition, Wallop departs from the friend-of-a-friend model common in all social networks today and the root of many of their problems. Instead, Wallop developed a unique set of algorithms that respond to social interactions to automatically build and maintain a person’s social network.

Whatever (although recent Microsoft offerings are based on apparently different formulations of a person’s social network).

It’s not that there is no market for online “social networking,” since it’s been evident ever since man invented modem that a large part of what was going on was people interacting socially with each other. The difficulty is the faddishness of the activity where yesterday’s Hula Hoop (e.g. Usenet, BBS, AOL) is soon catching dust in the garage and hordes of wannabees (e.g. The Source, Compuserve, Prodigy) didn’t even achieve that. The commercial trick is to be the first mover in a fad and make hay while the sun shines because inevitably your fadshare will get diluted by imitators and interest will dim as the ever fickle audience moves on.

For an entrepreneur hoping to capitalize on social networking, nimbleness and a lot of luck are survival, but for a large company like Microsoft the former is increasingly unlikely (if not always admitted) and the latter is really unnecessary. Microsoft can afford to attempt its own social networking offerings and also make widely placed insurance bets as long as the competitive overlap isn’t glaring, and that’s what Wallop appears to represent. Beyond that, of course, I’m sure Microsoft is perfectly willing to act as an “arms seller” and build a nice business selling their usual technologies (not Flash of course) and ads to the combatants without waiting and hoping for lightning to strike their own particular offerings.



Filed under Alliances, Coopetition, IP Ventures, Microsoft, MySpace, Patents, Social networking, Technologies, Web 2.0

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3 Responses to “Microsoft spins out Wallop”

  1. Microsoft’s IP Ventures sells “Touchlight” to EON Reality -- Microsoft News Tracker Says:

    [...] We first noticed Microsoft’s IP Ventures program last April when they sold some social networking technology to startup Wallop Inc. for a stake in the company. The admirable objective is to profit from technologies that Microsoft has developed but has no current use for, and late last night another deal was announced: Tomorrow at the Business of Innovation conference, Microsoft Corp. will announce it has licensed technology, code-named “TouchLight,” which it developed in its Redmond, Wash., research lab, to EON Reality Inc., a leading interactive visual content-management software provider. The technology will augment EON’s visualization offerings with its cutting-edge ability for users to physically interact with 3-D visual content. Completed as part of Microsoft’s IP Ventures program, an initiative that allows companies to refine and sell early-stage technologies first developed by Microsoft, the agreement is the latest based on a shared-success business model that fosters opportunity for startup companies in California and other technology hubs around the world. … EON Reality will incorporate the “TouchLight” interactive display technology into its existing commercial, automotive, aerospace and defense industry product lines. EON’s customers will be able to use the technology for dynamic marketing displays, product demonstrations and truly interactive training experiences. Within the next two years, EON estimates that the technology will be used in stores to facilitate advanced shopping experiences and interactive technical support with products and assemblies appearing to float in the air during interaction. EON estimates that within the next 24 to 36 months this technology could be affordable enough for desktops. Interested parties can view a demonstration of the technology at http://www.eonreality.com/video/touchlight/touchlight.wmv. Per Ina Fried at CNET: Microsoft is not taking an equity stake in Eon and will get licensing payments only when Eon has sales from a product using TouchLight. Other financial details were not disclosed. And from the AP: David Harnett, senior director of Microsoft IP Ventures, said the license is perpetual as long as certain milestones are met. Specific financial terms were not disclosed. [...]

  2. Microsoft spinout Wallop launches social networking service -- Microsoft News Tracker Says:

    [...] Back in April, Microsoft did a “spinout” of some Microsoft Research social networking technology to a startup called Wallop as part of their IP Ventures program. Aside from the basic novelty of Microsoft selling off unused technology for a share in the resulting company, it raised a few eyebrows since Wallop competes with Microsoft’s own social networking initiatives like Windows Live Spaces as well as the biggies like MySpace. [...]

  3. Wave goodbye to Wallop | Microsoft News Tracker Says:

    [...] April 2006, Microsoft joined some venture capital firms to spin out unused Microsoft Research social networking … which seemed to be a poster child for their IP Ventures arm. Wallop launched a beta of their [...]

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