Microsoft shakes up online division, deepens Facebook ties

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Microsoft is shaking up management of its online division and strengthening its tie to Facebook in the aftermath of a failed bid to buy Yahoo to bolster its lagging Internet business.

The U.S. software colossus says that later this year, Facebook will begin using its technology for online searches and paid links, which are essentially Internet ads.

Google has a similar deal with Facebook rival MySpace.

Facebook currently uses its own online search tools, which have disappointed members interested in being able to scour the Internet without leaving the popular social-networking website.

“Search in Facebook definitely needs to get better,” Facebook founder Mark Zuckerberg said.

Microsoft inked a deal to serve up ads on Facebook late last year when it paid $240 million for a 1.6% stake in the northern California startup.

Word of the deepened Facebook alliance comes after Microsoft announced a shake-up of its Platform & Services Division that includes the departure of the executive considered the architect of the failed campaign to acquire Yahoo.

The division is being split into Windows Live and Online Services groups that will report directly to Microsoft chief executive Steve Ballmer. Platform presidnt Kevin Johnson is leaving Microsoft.

“This new structure will give us more agility and focus in two very competitive arenas,” Ballmer said in a release. “It has been a pleasure to work with Kevin, and we wish him well in the future.”

Microsoft’s online Live services have languished in distant third place behind market leading Google and second-place Yahoo.

Microsoft’s new Windows Vista operating system has met with reluctance in the marketplace, where users complain it is incompatible with older software and that they are happier with its predecessor Windows XP.

Microsoft says Vista is winning acceptance and that it has sold more than 180 million copies of the software, most of it pre-installed in new computers.

“Our Windows business is firing on all cylinders,” Ballmer said.

“We see tremendous opportunity in search and advertising, and we have a clear strategy for investing in success today and growth in the future.”