Microsoft announced Tuesday that they will take Facebook and MySpace social networking websites head on with new tools users can buy and craft to improve the look and performance of their personal websites. The site created by Microsoft will be called Wallop which began four years ago and is backed by $13 million from Microsoft and venture capitalists including Norwest Venture Partners, Bay Partners and Consor Capital.

Wallop stated that they will allow users to purchase software through their social networking site from an online shopping marketplace will characters, graphics, games, backgrounds, and more to put on their “personal profiles.” The ad ons will cost anywhere from $0.99 to $4.00 a pop said Karl Jacob the CEO of Wallop. Oddly, users will only be able to sign up for the site if an exsisting member invites them (an approach that Facebook is looking to abondon in December).

With a domain name like MyWallop.com and only allowing members who are already registered to refer a friend to sign up, I see an early fall of the social networking site. Already, there are thousands and thousands of free MySpace layout, background, and games websites on the internet that allow MySpace users to add the ‘extras’ to their profiles free of charge. The people who create the ‘extras’ create websites that they generate Google Adsense revenue off of and do not charge the MySpace user a dime. That my friend, is the flaw of the system of social networking sites that Microsoft is not seeing with Wallop.