The deal, which gives Microsoft responsibility for placing all banner ads and paid links on the site, follows closely on the heels of a similar partnership struck recently between MySpace and Google.
The terms of the deal are undisclosed, but they're likely smaller than the $900 million Google paid to News Corp. to provide advertising to MySpace for a three-year period. Facebook has about 9 million registered users versus MySpace's 100 million. MSN-Microsoft search sites garnered about 12.8 million unique visitors last month--less than one-third as many as market leader Google, which drew 43.7 million users, according to comScore's qSearch unit.
With this deal, Microsoft could see its paid search revenues jump, predicted David Berkowitz, director of strategic planning for search engine marketing firm 360i. "It's a critical deal for Microsoft," Berkowitz said. "It gets them more distribution, which is important for marketers. AdCenter's been performing well--they have a lot of great targeting options, the technology has been great, they've been ramping up their distribution--but the big question is volume."
Meanwhile Aaron Cohen, CEO of Bolt Media, said the Facebook partnership will help Microsoft's search engine penetrate the young adult market in particular. "They're struggling with the 'people-under-30' demographic," he said.
The deal comes as Facebook is attempting to beef up its online ad efforts. In late June, the social networking site forged a deal with holding company Interpublic Group of Companies, which involved IPG acquiring a stake of one-half of one percent of Facebook in exchange for an undisclosed sum and a guarantee of at least $10 million of ad spending on the site.
Shankar Gupta contributed to this article.