Microsoft is linking up with long-time entrepreneur Karl Jacob to develop a new technology company to take on MySpace and other social networking services.

Dubbed Wallop, the 12-person San Francisco startup also is announcing venture funding today from Bay Partners.

The technology -- which automatically builds and maintains a person's online social network -- was developed by Microsoft Research over the past four years and is being spun out through the company's 11-month-old Intellectual Property Ventures initiative. Expected to launch this summer, Jacob described Wallop as an easy way for people to set up Web pages to express their individuality online.

That sounds an awful lot like MySpace, the wildly popular online community that has attracted some 65 million members. In an interview, Jacob did not entirely discount possible competition with the Santa Monica, Calif. powerhouse.

However, the 38-year-old entrepreneur said that Wallop will solve many of the problems typically associated with social networking services today, namely personal security, Web design and the way people interact with one another. On that last point, Jacob said that social networking sites today become impersonal because they are built around the idea of simply gaining more "friends."

Jacob said that concept "quickly devolves into everybody being in a sea of people all at the same interaction level" -- meaning it becomes difficult to share personal information with select members. Wallop, he said, has built algorithms on top of the Microsoft technology that watches personal interactions and then creates a network automatically.

Unlike MySpace, Wallop does not plan to make money through online advertising. Jacob declined to discuss specifics around the revenue model, saying only that Wallop is "very different" in its approach.

"I think there are a lots of interesting models for generating revenue in this space that have not been explored," he said.

One thought is that companies such as Microsoft and AOL could use instant messaging technologies to create stronger Web communities. Jacob declined to offer specifics about how Wallop might use instant messaging, though he said "there is clearly a nexus between instant messaging and social networking and there is going to be a lot of interesting innovation in that area."

Since launching IP Ventures last Spring, Microsoft has spun out two other research projects to startup companies: Redmond-based Inrix (real-time traffic analysis technology) and Dublin, Ireland-based Softedge-Systems (photo imaging technology).

With the latest deal, Microsoft is taking a minority equity stake in Wallop. It also will have a non-voting seat on the board, something it has not done in other deals.

David Harnett, senior director of Microsoft IP Ventures, declined to disclose the size of the equity stake it holds. But he said that Microsoft plans to remain very active in the development of Wallop.

"This is a situation where we spun out a lot of technology, very innovative technology, that really was stand alone and had great value in the market today, but really did need somebody like Karl to build a business model around it," said Harnett. "We are incredibly excited because we wanted to put together a really innovative technology with a top-class entrepreneur."

Jacob said that Microsoft's technology "gives us a tremendous head start" in an area where it could have "taken many years to do on our own."

Microsoft and Jacob are not strangers. The 4-time entrepreneur sold Java multimedia tools company Dimension X to the software giant in 1997, with Jacob remaining with Microsoft for two years.

Most recently, Jacob served as chief executive of San Francisco-based Cloudmark -- an anti-spam startup backed by Bellevue's Ignition Partners and others. During the dot com boom, he led Keen, a personal advice community that raised more than $100 million from Benchmark Capital, Vulcan Ventures, Merrill Lynch and others.

Here's some more background on the Wallop technology from a 2003 Wired story titled: "Will Microsoft Wallop Friendster" and a recent report from TechCrunch on how AOL might take on MySpace using instant messaging technology.