Facebook and Microsoft Expand Relationship

Microsoft announced today that it will integrate Live Search with the Facebook network. This will include search advertising served with results (via adCenter).

This grows out of the existing relationship that included Microsoft’s $240 million investment in Facebook and its placement of contextual ads throughout the network. At the time of that deal, it was a big question mark whether or not search was to be included. Today that question was answered.

Meanwhile, over in MySpace land, Google still serves ads as part of the relationship the companies struck last year. But Google has made public claims that its social networking monetization endeavors have been disappointing. Google’s exposure had a ripple effect throughout the media, online economy and general public temperament about the overall monetization challenges inherent in social networking.

Among other things, this partly comes down to the fact that social networking users don’t take kindly to any hint of commercial intent. Facebook’s ads so far have been pretty subtle but seem to be growing in number and presence over the past six months (maybe it’s just me).

Facebook has also integrated ad programs for small businesses, which Facebook’s VP of Operations Chamath Palihapitiya discussed at TKG’s fall conference. MySpace has done a little of the same, but its ad revenues mostly come from display advertising. It’s home page, for example, is a veritable mosaic of display ads (these are separate from the Google deal).

We’ll see where Microsoft search and search advertising can take Facebook and, more importantly, how users react. Its redesign being rolled out this week could play a big part in all this. The Live Search integration will take place sometime this fall.

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Other notable announcements are coming out of Facebook’s F8 developer conference. More on that soon.