A deal giving Microsoft Corp. (MSFT) a prominent role in powering Web searches on social networking site Facebook is part of a tapestry of smaller alliances, investments and tactics the software giant is pursuing to expand its online advertising businesses.Since it’s highly unlikely Microsoft will acquire Sunnyvale, Calif.-based Yahoo Inc. (YHOO) in order to reach significant scale in its Internet search activities, Microsoft is taking a piecemeal approach to improving its loss- making Online Services Business. It is focusing on improving its technology and boosting its audience share in myriad ways.
Few think there’s any short-term prospect the company will vault past Mountain View, Calif.-based Google Inc. (GOOG) in the search market race any time soon. But the Facebook deal will boost Microsoft’s audience and showcase its improving advertising search credentials, and both parties should generate additional revenue.
“This is a great deal for Microsoft,” said Shar VanBoskirk, principal analyst with tech research firm Forrester Research. “They have some really smart search technologies, but there just aren’t a lot of people using them.”
Redmond, Wash.-based Microsoft said last week that it would soon provide Web search services on U.S. Facebook sites through its Live Search engine. Facebook is one of the world’s most popular social networking Web sites. Microsoft last year invested $240 million in a 5% ownership stake in Palo Alto, Calif.-based Facebook, whose site works by offering users free accounts where they can keep in touch with their friends through email, pictures, music and games.
Microsoft declined to provide specific information about how the search deal will work, but most analysts think that it’s likely Microsoft will place a search “toolbar” on Facebook, allowing users to search the wider Web from within their Facebook accounts.
Like most of the other smaller initiatives taking place to bolster Microsoft’s online business, the Facebook deal isn’t expected to shift the market-share landscape. Google in May took more than 68% of U.S. Internet searches, according to Hitwise. Searches, which account for roughly 40% of total Internet advertising, are the most profitable segment of the Internet economy. ComScore said that in June, Google took 63.7% of global searches, with Microsoft taking just 3.1%.
But Microsoft’s current approach seems designed to highlight the specialized and innovative nature of its search properties, which some analysts think are under-appreciated. Recently, Microsoft bought San Francisco-based Powerset Inc., a so-called semantic search specialist; acquired Seattle-based Farecast Inc., a travel search specialist; and announced such promotions as Cashback Search, which allows consumers to get money back on selected searches. Continue reading the rest of this story here.
