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While TechCrunch reports a rumor about Apple developing its own search engine to target Microsoft’s products and earning in yet another market, the Redmond-based software house unveiled new, major changes to its search engine, which is now much more oriented towards social interaction and integration with third-party websites such as Flickr, LinkedIn and WordPress, as well as Microsoft’s own email and instant messaging services.

The new updates will go live in the coming weeks, starting from December in the U.S., and will then gradually rolled out for the rest of the world during the following weeks and months. On the footprints of the OpenID, the idea behind the new version of Microsoft’s Web search is to offer a unified username/password combination to access and receive regular updates from many popular services on the Web.

Users will be able to create their own profile and populate it with personal data and pictures, inserting personalized news feeds and updates from many third-party websites; as for the “traditional” Live services such as Hotmail, Messenger and Spaces, users will be granted up to 25 GB of space to upload their personal data (up from the previous 5 GB) and a brand new online movie making and office productivity suite similar to Google Docs. As part of the updates, the company has also recently merged Windows Live Hotmail’s “standard” and “classic” modes.

Photo sharing is said to be one of the updates’ main focus, since Live Search will be offering both its own storage options and ways to connect to Photobucket and Yahoo’s Flickr. According to CNET, HP will also bundle Microsoft’s Windows Live Photo Gallery software with its consumer printers, starting next year. Facebook and Myspace, of which Microsoft owns a 1.6 percent share, are however not in the partner list at this time.

Brian Hall, general manager of Windows Live, said that with the latest updates are aimed at expanding the amount of time users spend in Windows Live, which according to Microsoft’s own estimates is already around 11 percent of their total surfing, largely thanks to the popularity of Hotmail and Messenger, to which the company owes the greatest part of its 460 million users: Windows Messenger in particular is still retaining a good advantage over Google Talk and Yahoo! Messenger in terms of market share.

But the company objective is certainly to retain not only visitor for as long as possible, but also to their market share in Web advertising, and specifically with regards to their new, free online office productivity suite that will compete with Google’s own product, which is currently oriented towards open source document formats such as ODT (Open Document Text), also supported by the OpenOffice.org suite.

According to Michael Arrington at TechCrunch, Microsoft’s idea is not a new one: “A lot of what they’ve done is exactly what Yahoo has been talking about for over a year now — leveraging social connections that already exist (Yahoo is using email, Microsoft is using Messenger) and doing a lot more with it”, he said. So, while Yahoo! may not have had the financial means to put this idea in practice soon enough, the Redmond-based company is, as its CEO Ballmer said earlier last month, ready to aggressively invest in the Web search market, motivated by the income that this kind of advertising can bring.

In fact, the renovation to the Live platform doesn’t stop here: just yesterday, Microsoft unveiled “Project Silkroad”, a new Live Search API that developers can use to embed or elaborate search results much more easily than before, thanks to the support for recent Web development technologies such as RSS and XML and less restrictions on the way third-party websites can use such results — for instance, they will no longer be required to display Microsoft Search advertisements along with the results, although if they choose to do so they will benefit from a revenue-sharing agreement.

Starting in early 2009, Microsoft will also start rolling out new changes for Hotmail. With the new version, PC users will be able to send messages from any of their POP-enabled e-mail accounts — another Hotmail address or a Gmail address, for instance — and read Hotmail in other programs that support POP e-mail technology; finally, Hotmail will also feature instant messaging capabilities, similar to what Google’s Gmail already does.