'Friends' against Google 
Microsoft Corp. friended Facebook Inc. long before the social network set in motion what’s expected to be a blockbuster initial public offering next week.
() - Now, that friendship is getting stronger, analysts say, as the two tech titans face off against a common rival, Google Inc. GOOG -1.37%
Microsoft MSFT +1.37% clearly saw Facebook’s FB 0.00% potential early on, investing $240 million in 2007, which gave the software giant a 1.6% stake in a company and implied a valuation at the time of $15 billion. Facebook is expected to go public on May 18 with an estimated valuation of up to $96 billion.
The two companies have been working closely together since. “It’s an ever closer union,” IDC analyst Karsten Weide said in an interview. “Both Facebook and Microsoft realize that they can help each other to compete with Google.”
Those ties were underscored Thursday with the launch of an updated version of Microsoft’s Bing search engine, featuring a “social sidebar” that has tighter integration with data from Facebook.
“You can post a question to get help from your Facebook friends as you search,” a Microsoft blog post said. “You can ‘tag’ friends Bing suggests might know about the topic. In a few simple clicks, you can share your search and your friends can reply to your question on either Facebook or Bing.”
The focus on search makes sense as it is seen as one of the most promising areas for a better relationship, according to analysts. “Search is a big deal,” Weide of IDC said, adding that it’s where Microsoft and Facebook could really cause Google to worry.
“This could actually threaten Google. It’s just so much distribution, it could really eat into Google’s market share.”
However, Microsoft’s Bing may need to play a more prominent role on Facebook for it to have an impact on Google’s dominance. Baird analyst Colin Sebastian said Bing is “Microsoft’s best opportunity to ratchet up competition with Google, which remains by far the most successful search engine with roughly 70% global market share.”
However, he commented, “short of becoming prominently displayed as a default search engine on Facebook, the new Bing is unlikely to effect a meaningful impact on Google’s market dominance.”
Microsoft's search engine gets a redesign that incorporates information from social networks like Facebook and Twitter. Shira Ovide reports.
Bernstein Research analyst Carlos Kirjner wrote in a note that “the game of search as we know it is over, and Google has won.”
“These are some of the reasons why we think it is highly unlikely that anyone will out-compete Google if search remains more or less the same or continues to evolve incrementally, without any major disruptions,” he said.
Some investors and analysts think Facebook could be that disruption. The social network’s business is based on the social graph, which refers to the online-computing concept that enables Facebook to make interconnections through the enormous amount of user data it collects.
Facebook also has often been portrayed as the Web’s a walled garden. “What Facebook is doing is they’re inventing a second Internet,” Weide observed.