Yesterday at CES, Microsoft CEO Steve Ballmer announced an expanded Facebook integration with its Windows Live service in which Facebook news feed stories will now also appear in the Windows Live update stream. Windows Live has integrated updates from over 50 third party sites for months, but Facebook has not syndicated its news feed stories to Live until now.

The move marks a second step in Microsoft’s integration of Facebook into Windows Live. Last November, Microsoft and Facebook created a contact importer allowing Windows Live users to import their Facebook contacts directly into Windows Live.

The integrations reflect the deepening partnership between the two companies following Microsoft’s $240 million investment in Facebook and the formation of a deep advertising sales relationship over a year ago. This depth of integration in the Windows Live update stream is a new test for Facebook, which historically has made its News Feed only accessible within its own properties.

“As with products like Facebook Connect, we’re focused on helping people share their lives online with friends, no matter what services they use.  Since Microsoft is a strong and trusted partner, this is a good opportunity to test this type of integration,” a Facebook spokesperson told Inside Facebook today.

According to Facebook, only the following types of feed stories will be syndicated to Windows Live:

• photos
• videos
• status updates
• profile updates
• notes
• pages users are a fan of

Looking Ahead

Where else will the Facebook-Microsoft partnership go in 2009?

Many have speculated that Facebook’s partnership with Microsoft will lead to innovations in social search and search and display advertising. For example, Lookery CEO Scott Rafer speculated last year that, “FB Connect code is going to collect every search referrer URL from every Connect partner site and use it to target M$ Live Search and other ads any number of places.”

However, others like David Kirkpatrick have speculated that Microsoft wants Facebook to be “a big participant in its move toward social networking in the enterprise” given that a large portion of Microsoft’s business today is still derived from business sales and enterprise services.

We’ll keep you updated on the latest as the Microsoft-Facebook partnership evolves in the months ahead.