“Software giant seeks to leverage the social-media site to boost its share of the search market.”
New York — Microsoft Corp., having unpleasantly abandoned all hopes of tying up a deal with Yahoo! to bolster its lagging Internet business, is earnestly wriggling up management of its online division and strengthening its tie with Facebook to boost its web search and search ads business as the two sign a deal.
The deal between the Vole and Facebook, the online social networking powerhouse will provide web search and search advertising, as part of an extension of the ad partnership forged by the two companies in 2006, a source familiar with the matter said on Thursday.
The Redmond Vole has tried various tactics to broaden its share of the lucrative online search business. The US software colossus told analysts Thursday that later this year Facebook will begin using its technology for online searches and paid links, which are essentially Internet ads.
“Google has a similar deal with Facebook rival MySpace.”
The extended pact follows Microsoft’s decision not pursue a takeover of Yahoo Inc. to augment its online search and advertising business as it tries to compete with Internet leader Google Inc.
The search service will begin on Facebook this fall, Microsoft Senior Vice President Satya Nadella told attendees at Microsoft’s annual meeting for financial analysts in Redmond, Wash.
The deal is a step forward for the software giant’s struggling Internet search business, allowing searches from Facebook’s 90 million members to pass through its system. The relationship is an extension of the existing partnership between the two companies. Microsoft, which owns a small stake in Facebook, already has an exclusive agreement to sell banner ads on the social networking site.
Microsoft acquired a 1.6 percent stake in fast-growing Facebook for $240 million in October, defeating out Google in the investment. At the time, it reached an exclusive deal to sell ads on Facebook outside of the United States.
“However, the current partnership will be for U.S. Facebook users only and it was not immediately clear whether it would be exclusive.” But the deal could pose a threat to Google Inc., which commands by far the largest share of the search and search advertising market.
Facebook at present utilizes a homegrown search engine for its social network, which does not include results from the Web and have disappointed members interested in being able to scour the Internet without leaving the popular social-networking website.
“Search in Facebook definitely needs to get better,” Facebook founder Mark Zuckerberg said while speaking with news reporters on Wednesday.
“That is something they will begin in the fall,” Nadella said at Microsoft’s financial analyst meeting in Redmond, Wash.
A person familiar with the talks said the feature will be a “complement” to the current Facebook service and would not change the overall look and feel of the site.
Microsoft recorded a 9.2 percent of searches in June, per comScore, versus a 61.5 percent share for Google. Putting a Live Search box on thousands of Facebook pages — which should happen by the end of this year, said officials — would likely bolster that share number, given that the social-networking site reaches 37 million-plus monthly unique users.
To Microsoft, Facebook is a quick way to expand the audience for its search engine. They will soon see prominent displays of Microsoft’s Live Search box on their friends’ and their own Facebook pages.
“One of the issues with Microsoft search is that people just have not been exposed to it,” said Greg Sterling, founder of Sterling Market Intelligence, a consulting and research firm. “Familiarity and inertia keep people using what they use on the Web.”
The deal marks the second important distribution agreement for Microsoft’s search service in as many months. In June, Hewlett-Packard, the world’s largest PC maker, agreed to put Microsoft’s service on its desktops.
Word of the expanded Facebook alliance comes a day after as Microsoft Chief Executive Steve Ballmer announced a shake-up of its Platform & Services Division that includes the departure of the executive considered the architect of the failed campaign to acquire Yahoo Inc. this year.
The division is being split into Windows Live and Online Services groups that will report directly to Microsoft chief executive Steve Ballmer.
Platform president Kevin Johnson is leaving Microsoft.
“This new structure will give us more agility and focus in two very competitive arenas,” Ballmer said in a release. “It has been a pleasure to work with Kevin, and we wish him well in the future.”
Microsoft’s online Live services have languished in distant third place behind market leading Google and second-place Yahoo.
“Search is one of the starting points on the Internet,” Ballmer told financial analysts at Microsoft’s headquarters. “It is the best place to distribute new Internet services to the consumer.”
As an example, Ballmer said that Google’s Gmail email service would not have become as popular as it has if Google did not have a strong position in search.
Indeed, Microsoft CFO Christopher Liddell told financial analysts that Yahoo was a “declining asset” and noted that chances of a full acquisition were “negligible”. According to Lidell, “time passed and its value eroded”.