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Steven A. Ballmer, chief of Microsoft, which has a deal with Facebook.
It recently failed in its pursuit of Yahoo. It is paying people to use its search engine. Now Microsoft thinks it has found a promising source of users for its foundering search service: Facebook, the social networking site.
Microsoft said Thursday at a meeting with financial analysts at its headquarters in Redmond, Wash., that it would soon begin providing Web search services and associated advertisements by the end of the year on the American portion of the popular social network.
The agreement augments an existing advertising deal that the companies struck in 2006 and later expanded globally. Microsoft already sells and manages display advertisements on Facebook. Last October, the companies inched even closer together when Microsoft invested $240 millionfor a 5 percent ownership stake in Facebook.
•The search deal could be a lift to Microsoft as it seeks to catch up with Google and Yahoo in the search business. In June, Google accounted for 61.5 percent of search queries in the United States, dwarfing Yahoo, with 20.9 percent, and Microsoft, with 9.2 percent of queries, according to tracking firm comScore. One of the reasons Microsoft pursued Yahoo so doggedly this year was to increase its share in the overall market.
To Microsoft, Facebook is a quick way to expand the audience for its search engine. More than 29 million people actively use Facebook in the United States. 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 haven’t 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.
The deal fills a significant gap in Facebook’s service. When people are using the social network and have questions, they have to leave Facebook to go to a search engine. With the new search toolbar on the page, users can stay on Facebook while making their queries.
Other social networks already have a search feature. MySpace uses search and search ads from Google, while the social network Bebo has a similar arrangement with Yahoo.
A Facebook spokesman said on Thursday that the company was determining where the search box would go and how to make it work best for users.
Microsoft and Facebook did not release any financial details of the deal or whether Microsoft was paying a percentage of revenues or a guaranteed sum to Facebook each year.
As part of its three-year deal to serve up search and display ads on MySpace, Google guaranteed MySpace, a division of the News Corporation, around $900 million. Google executives have complained that it is difficult to advertise effectively on a site where people are more interested in socializing with each other rather than clicking on ads.
•Microsoft could very well encounter the same problems on Facebook.
“It is not a given that Microsoft can successfully monetize the Facebook search business,” said Youssef H. Squali, an analyst at Jefferies & Co. “It’s just really hard to monetize a social network, and I would argue that Google is in a better position to do it. They have thrown more resources against it and they have been at it for the last eight years.”
Google, Yahoo and Microsoft have battled one another for years to secure large distribution partners for their search services. Late in 2005, for instance, Google beat back Microsoft’s efforts to replace it as the search provider on AOL.
Analysts say that the number of large potential partners has dwindled.
“Facebook is one of the few virgin territories left,” said a search expert, Danny Sullivan, the editor of Search Engine Land, a Web-based journal. “It gets Microsoft potentially a lot of distribution. It is not a game changer, but it is an important deal.”