Cisco Systems said Monday it's buying social-networking technology from privately held Utah Street Networks, the operator of the social-networking site Tribe.net.
This is the second social-networking play the company has made since it formed the new Media Solutions Group last year. In February, it announced it was acquiring the 11-person social-networking start-up Five Across, which is based in San Francisco.
Is Cisco assembling technology to build the next MySpace or YouTube? The answer is "no", which helps explain why Cisco said it has not acquired the Tribe.net social-networking site, which will continue to operate independently.
The networking giant only plans to use certain technology from Tribe.net and Five Across to build software and hardware products that it can sell to companies so they can build their own social-networking sites.
This approach is expected to allow companies or other organizations to integrate social networking into their Web sites quickly and relatively inexpensively when compared to developing all the technology themselves.
Marc Andreessen, co-creator of Netscape, has also co-founded a new company called Ning to make building social-networking sites more plug-and-play. But unlike Cisco, Ning is targeting consumers.
Because they seem to be going after two different markets, it's surprising to read Andreessen's skeptical comments about Cisco's strategy in a recent New York Times article: "The idea that Cisco is going to be a force in social networking is about as plausible as Ning being a force in optical switches." Ouch!
I agree with Andreessen that it's unlikely Ning could build an optical switch. But as for Cisco acquiring technology from a bunch of tiny start-ups and using it to build new software and hardware products that it will sell to large companies--which already buy a ton of other Cisco equipment--I might have to disagree with him.
The fact is, this is classic Cisco. The company has used the same acquisition recipe for the past 20 years to get into pretty much every new market it's ever entered.
I'm sure 10 years ago Alcatel and Nortel Networks couldn't imagine competing with Cisco for corporate phone customers. But today Cisco has built a business that generates more than a $1 billion per year selling IP telephony software and equipment to large companies. And it's considered the No. 1 supplier for IP telephony gear. Now Alcatel and Nortel are struggling to compete with Cisco when it comes to IP telephony.
So with that in mind, I wouldn't bet the farm against Cisco just yet.