Facebook, others move to boost social net innovation

Computerworld - As social networking keeps getting hotter, a few major Internet players are looking to direct some of the upcoming action.

A group of Internet heavyweights, including Facebook, Amazon.com and Comcast on Thursday set up a $250 million fund to invest in social networking start-ups. Well-known Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers (KPCB) is spearheading the fund, which has been dubbed the sFund.

The venture capital firm has backed several online start-ups over the years that became wildly succsssful, including Google, Amazon and AOL.

"Social is just getting started and the opportunities are vast," said KPCB partner Bing Gordon in a statement. "As in the early days of the Internet, the race is on. Today every business, organization, and entrepreneur should have a social strategy."

Gordon is a member of the boards of directors at Amazon and Zynga, an online gaming company and another backer of the fund.

Facebook according to KPCB, will contribute to the program access to its platform teams, beta APIs, and new programs like Facebook Credits, which is virtual currency that can be used games and apps on the Facebook platform. Zynga, best known for its Farmville gaming app, agreed to have its executives meet with start-ups to discuss management and technical development techniques.

While this has to be welcome news to social-focused start-ups around the world, the question is why companies like Facebook and Zynga would want to promote competition in their own arena?

"I think it's a pretty smart way for Facebook to co-opt potential competitors," said Ezra Gottheil, an analyst with Technology Business Research. "For Facebook, this increases the likelihood that they are going to see potential social networking innovations early, and get to encourage them to stay inside the tent. Any start-up funded by this group is less likely to be a competitor than if funded elsewhere."

Zeus Kerravala, an analyst at the Yankee Group, said with companies like Facebook and Zynga involved, fewer "me too" kinds of social networking companies will get a push. He says that means start-ups that work with Facebook or somehow support Facebook, instead of competing with it, could be more likely to get a good boost.

"For Facebook, a larger ecosystem around Facebook creates stickiness and creates a 'rising tide' where Facebook is at the center," said Kerravala. "My guess is much of the investment will be with companies that interoperate with Facebook. The industry doesn't need another Facebook but needs to make Facebook do more."

This social networking fund also may play a role in Facebook's growing rivalry with Google.

Reports have been circulating the Internet for a few months that Google developing a own social network that would compete with Facebook. And Facebook, the most popular social network, has been making some moves to better position itself to take on a frontal assault from the world's biggest Internet company.

Earlier this month, for instance, Facebook furthered its partnership with Google rival Microsoft to making searching with the latter's Bing search engine more social. Providing help to start-ups that one day will support the facebook platform will further help the company in its battle with the search giant.

"[Facebook] is moving forward in social network, and Google may happen to be in the way," said Gottheil. "Social networking is a growing category, so expanding companies are going to be fighting it out."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

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