Microsoft looks to Facebook to expand Live Search

Veteran bloggers question ramifications of deal.

Microsoft yesterday announced that it is expanding its banner advertising agreement with Facebook to include Live Search capabilities and paid search advertising on the social network.

Microsoft, which bought a US$240 million stake in Facebook last year, told the IDG News Service that it expects the deal will expand the use of the Live Search engine, though some veteran bloggers questioned those expectations. The company did not provide financial details of the new deal.

Greg Sterling, a blogger at Search Engine Land, noted that when Microsoft bought the minority stake, he expected that Live Search would inevitably come to Facebook.

"This is a big deal for both Microsoft and Facebook, which had no Web search prior to this," he noted. "If Facebook eventually drives a good deal of volume it can help Microsoft gain exposure to users and potentially additional market share over time, but also will drive search revenue. Facebook now has in excess of 100 million users globally."

However, TechCrunch's Jason Kincaid pointed out the new deal is similar to a so-far less-than-successful $900 million agreement Google signed with News Corp.-owned MySpace in 2006 to provide search and search advertising to MySpace and other News Corp sites.

"Google has had a hard time monetizing the search deal with MySpace, but it blames the underperformance on the difficulty with monetizing social networks in general," he noted. "It's probable that Microsoft will run into similar issues on Facebook, but it may be just as concerned with exposing users to Live Search as it is with generating revenue, at least in the short term. Back in 2006 [TechCrunch] speculated that Microsoft may have been taking a loss on its initial advertising deal with Facebook, simply to beat out Google and get some traction in the advertising space. It may be taking a similar approach here."

He added that this is another step by Microsoft to boost the Live Search offering, which has not been as popular as competing engines from Google and Yahoo.

Mashable's Adam Ostrow also noted that the Google-News Corp. partnership has produced only "lukewarm" results for Google because most social networking users use their search service of choice despite any integrated options on social networking sites.

But, he acknowledged that "the law of huge numbers means that at least a few people" will do their Google, Yahoo, or Live searches via a partner site.

"What will be interesting to see is if the social networks begin to do innovative things with social search by leveraging your friends list," Ostrow added. Yahoo recently released Build Your Own Search Service (BOSS) to allow developers to do just that."

Meanwhile, AllFacebook blogger Nick O'Neill, argued that the deal could result in Facebook becoming a "search force to be reckoned with" given the large traffic that the social network commands.

"Currently search is the most profitable technology on the web and it's an area that Google has continued to dominate," O'Neill noted. "Microsoft is the third largest search provider on the Web, and this partnership with Facebook could give Microsoft a substantial boost."

He pointed to Facebook CEO Mark Zuckerberg's assertion this week that he is still not focused on monetizing Facebook. "Honestly, it's the same strategy that Google used and soon enough they became the most profitable internet company in the world," O'Neill added. "Whether or not the monetization problem is solved, it looks like Facebook will have at least one more revenue source for the time being."

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