VideoEgg integrates brands into online communities. The tie-up will allow WPP's clients to promote their services through VideoEgg's designated ad network, The Eggnetwork.
Alongside AOL and Bebo, VideoEgg has forged partnerships with hi5, myYearbook.com and Tagged, forming a potential viewing base of more than 12m unique users every month.
Mark Read, CEO at WPP Digital, said: "Our clients want to understand how to use online communities to build brands and communicate with consumers, particularly younger consumers, who are spending time in these communities.
"VideoEgg has built significant distribution and created innovative advertising solutions to reach this audience."
Rob Norman, CEO at GroupM, WPP's investment arm, said: "Our partnership with VideoEgg not only provides a more focused way for our clients to participate in the growing world of social networks and user generated content, but also provides our operating companies a keen understanding of the forces reshaping the media world."
VideoEgg was founded in 2005 by Yale classmates David Lerman, Matt Sanchez and Kevin Sladek. Based in San Francisco, the company is about to open an office on London.
Jordan Ferguson, European managing director of VideoEgg, said: "Together with WPP and GroupM, VideoEgg can provide marketers with unparalleled means of reaching their audiences."
WPP joins existing VideoEgg investors Maveron, August Capital and First Round Capital.
The communications group is heavily investing in the digital sector and recently bought a stake in Media Rights Capital, the film, TV and mobile company, and Iconmobile, a mobile marketing company.