Microsoft Tautens Ties with Facebook

28 July 2008

REDMOND, Washington: Microsoft's unrelenting but increasingly frustrated desire to erode Google's online dominance has led to an strengthened alliance with social networking website Facebook.

The deal will put the MSN search service, with related advertising, on Facebook as the software titan tries to boost the effectiveness of its search technology and help it deliver more relevant ads to users.

Last year Microsoft invested $240 million (€152.6m; £120.3m) in Facebook, a move that effectively valued the startup at $15 billion. It also inked an exclusive deal to sell ads on the website beyond  US shores.

Since then, Facebook has overtaken NewsCorp's MySpace as the world's biggest online social network, but its revenue potential has yet to be fulfilled. It hopes this latest agreement with Microsoft – financial details of which have not been revealed - will lift its sales.

Microsoft, for its part, appears to be putting Plan B into action, triggered by its [as yet] failed attempts to acquire struggling online pioneer Yahoo.

The software colossus announced last week the departure of Kevin Johnson, architect of the unsuccessful Yahoo bid, and the split of its online business into two parts.

Windows Live is to be hived-off into its Windows division, while its ad and media assets such as aQuantive, adserving, search and MSN are moving into a new online services division.

Both groups will report directly to ceo Steve Ballmer.

Data sourced from Brand Republic (UK) and Financial Times Online; additional content by WARC staff