Microsoft has spun out Wallop, a ridiculously visually stunning online application for social networking. I checked out Wallop awhile ago and was very impressed with its capabilities and it's interface. There were capabilities built in to aggregate rss feeds. Further, instead of connecting to individuals to create a false social network, Wallop detects social networks by examining behavior. Here's more from 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.

What's most interesting to me is that Microsoft recognized that they were unable to develop and commercialize this internally. With all of Microsoft's traffic and online reach, there's no doubt that they could have driven usage of the site. But, would they have been able to create a business out of it as they focus on developing the search + contextual advertising business? I guess not.

More at Google Blogoscoped.