By Dina Bass
(Bloomberg) – Microsoft Corp., an investor in Facebook Inc., expanded an Internet-search agreement with the social-networking service, while losing the site’s banner- advertising business.
An earlier agreement to sell Internet-search ads for Facebook will now extend outside the U.S. and include new features, Microsoft said today on its blog. The two companies decided to stop having Microsoft sell banner ads on behalf of Facebook, Microsoft said.
Microsoft is looking to use search agreements to narrow the gap with Google Inc., which handles about two-thirds of U.S. Web queries. Facebook, meanwhile, is rethinking its approach to banner ads. The company will focus on graphical ads that tie in to social activities. Redmond, Washington-based Microsoft had sold banner ads for the site for more than two years.
“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,” Jon Tinter, general manager of Microsoft’s Bing search engine, said on the blog.
Brandon McCormick, a spokesman for Palo Alto, California- based Facebook, didn’t immediately respond to an e-mail seeking comment.
Microsoft fell 1 cents to $27.83 at 1:07 p.m. New York time on the Nasdaq Stock Market. The shares rose 57 percent last year.
In addition to the Facebook deal, Microsoft expanded a search agreement last month with Hewlett-Packard Co., the world’s biggest personal-computer maker.

–Editors: Nick Turner, Jonathan Thaw

To contact the reporter on this story: Dina Bass in Seattle at +1-206-913-4543 or dbass2@bloomberg.net

To contact the editor responsible for this story: Jonathan Thaw at +1-415-617-7168 or jthaw@bloomberg.net

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