Microsoft Announces Search Deal With Facebook; Expands on Ad Deal

Google-MySpace Part II? WSJ reports that Microsoft (NSDQ: MSFT) will unveil a search deal with Facebook at today’s analyst meeting…. Update: The news was just announced by Microsoft’s Satya Nadella on stage at the company’s analyst meeting, after first reciting a long list of technical accomplishments that the company had achieved in search. Here’s the exact announcement based on the transcript (so it’s a little sloppy): “One last thing I want to talk about is an extension of our Facebook relationship where we are extending it to search and page search. We will be providing an API to Facebook where they will create a rich search experience for the Facebook users and that is something that they will launch in the fall working with us. And it will carry both our web results, as well as our page search advertising. We are excited (transcription error here) as an opportunity to further expand the Live Search reach. That is what I have in terms of anteing up and focus (sic) our invention and reinvent the business model. Let me flip back to Steve.”

Given Microsoft’s outsized investment into Facebook (They invested $240 million at a $15 billion valuation, though court documents suggest Facebook’s internal valuation for itself is much less), it makes sense that this might happen. It is an extension of the established advertising relationship between the two companies that goes back to 2006.

Obviously some initial questions come to mind: Assuming that Facebook is getting some kind of revenue guarantee for this, how does it compare to Google’s $900 million guarantee to MySpace? Google (NSDQ: GOOG), of course, has had a tough slog of it. Will users actually use Facebook to search? Could this bring Microsoft enough extra scale so as to start monetizing search all around better? And will advertisers get to place ads directly into Facebook, or will they be part of the larger Live Search inventory?