Microsoft has penned a deal with Facebook, which will see the social networking site integrate Microsoft's Live Search and search ads into the site.
The deal represents a further deepening of the relationship between the two companies, which already sees Microsoft running graphical display ads on Facebook pages.
Back in October, Microsoft also purchased a 1.6% stake in Facebook for $240 million, valuing the social networking site at $15 billion.
The deal comes as Microsoft dismissed further attempts to purchase Yahoo, and began looking to life beyond former online services boss Kevin Johnson, who is quitting to takeover at Juniper Networks.
The announcement comes as Steve Ballmer defends Microsoft's heavy losses in online services to investors.