Microsoft Stops Selling Display Ads On Facebook — But Expands Search Deal

Microsoft (NSDQ: MSFT) and Facebook have rejiggered their ad relationship: Microsoft just announced that it will no longer sell display ads on the social network, although it will expand its search ad deal with the site. In a blog post, Microsoft says Bing will now be the default web search engine on Facebook worldwide, instead of just in the U.S., where it has been the default since July 2008.

Bing will also get some more prominence on Facebook since Microsoft says that it will “soon provide Facebook users with a more complete search experience by providing full access to great Bing features beyond a set of links.” In its current incarnation, it’s very hard to tell that web search results on Facebook are coming from Bing; results appear as a drab list of links — and the line “powered By Bing” appears to be in size 6 font. Any changes that would actually play up “Bing features” could potentially have a notable impact on Bing adoption, considering that Facebook now claims 400 million monthly users.

The end of the display ad deal isn’t surprising, since the two companies had been scaling back that relationship for several months now. Microsoft had already stopped selling display ads on Facebook in some international markets and in an intervew with BusinessWeek last month, Microsoft executives said that Facebook wanted to sell more of its own ads so it was possible that Microsoft would soon not be selling any display ads on the social network in the U.S. either.

Microsoft describes the decision to end the display relationship as being mutual: “Given the kinds of advertisements that make sense within a product as unique as Facebook, it just made more sense for them to take the lead on this part of their advertising strategy.”

The changes could also be representative of a greater shift at Microsoft, which has said that building Bing’s market share is its top online goal. That implies that the display business is playing second fiddle.