October 13, 2010 / 7:50 PM / 9 years ago

Microsoft deepens Facebook ties in Web search battle

MOUNTAIN VIEW, California (Reuters) - Microsoft Corp deepened its ties with social networking company Facebook on Wednesday, bolstering its fledgling Bing search engine to catch up with Google Inc.

Starting on Wednesday, Bing will integrate content from the world’s leading social network, tailoring search results to users’ preferences based on information from their network of Facebook friends — which Google does not do.

The world’s largest software company has stepped up its efforts within its online services division — which lost $2.3 billion last fiscal year — to challenge the dominance of Google, the world’s largest search engine.

Shares in Microsoft finished 2.1 percent higher. Yahoo Inc, which has a 10-year agreement to use Bing on its sites, gained 5.7 percent.

“The thing that makes Microsoft a great partner for us is that they really are the underdog here,” Facebook Chief Executive Officer Mark Zuckerberg told reporters at Microsoft’s Silicon Valley offices. “Because of that they are in a structural position where they’re incentivized to go all out and innovate.”

The Facebook data provides important “signals” to help refine search results, Microsoft Online Services Division President Qi Lu told reporters.

As part of their agreement, Bing will be able to access user’s publicly available Facebook profiles and their “likes” on the social networking service, and deliver search results tailored to individual preferences.

Microsoft invested $240 million in Facebook in 2007, giving it a 1.6 percent stake in the world’s largest social networking company with half a billion users, and the two have forged various business collaborations over the years.

Google remains the undisputed leader in search with 66.1 percent of the U.S. market in September, according to research firm comScore. Yahoo is second with 16.7 percent and Bing third with 11.2 percent.

Microsoft introduced the overhauled version of its search engine last year, and forged a 10-year partnership with Yahoo that merges the companies’ back-end advertising systems, offering marketers a larger audience.

Bing is now the exclusive provider of Web search on Facebook, and Microsoft sells text-based search ads for the social networking site.

Microsoft’s shares closed up more than 2.1 percent, or 51 cents, at $25.34.

“It’s good that they are finally trying to address these shortfalls in Web presence and mobile,” said Kim Caughey Forrest, senior analyst at Fort Pitt Capital Group, referring to the Facebook announcement as well as the launch of new phone software earlier this week.

“But I’m not sure when it’s going to translate into dollars. As an investor that’s really what I want to know. What’s it going to do to your bottom line?”

(Reporting by Alexei Oreskovic; editing by Carol Bishopric)

Additional reporting by Bill Rigby, writing by Edwin Chan

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