Microsoft digital head Qi Lu took to the stage at the Web 2.0 Summit conference this morning, where he confirmed a “strategic” deal with both Facebook and Twitter to integrate real-time information into Microsoft’s Bing search service.

BoomTown broke news of those twin deals earlier today.

Bing’s Twitter integration in beta form is now live here (see an image of it below; click on it to make it larger).

Facebook’s integration will come later, said Microsoft (MSFT).

Before announcing the deal, Lu–who is a quintessential techie–first went a bit deep into the weeds to talk about “how we think about search.”

Said Lu: “To start with, we think about search holistically…it’s about user intent. What it amounts to is that you are trying to build a mind reader.”

Top MSN exec Yusuf Mehdi then bounded onstage to talk about the deals with Twitter and Facebook and do a demo, which was what the audience gathered in San Francisco wanted to hear about and see.

“If today’s search is about getting to the UPS or the FedEx site, tomorrow is much more complicated,” said Mehdi, who described the deals as “strategic.”

Google (GOOG) is also in talks with both Twitter and Facebook about a similar arrangement, but Microsoft’s move was a clear one-upsmanship with its search rival.

And what Mehdi showed was impressive, with the ability to sort tweets in a number of ways.

Such information in search will obviously improve results.

Lu gave few specific monetary or operational details of the service–such as if Facebook and Twitter get a cut of its search advertising revenue or if Microsoft will archive the status updates–mostly focusing on Twitter, since it is first to roll out.

“This is just the beginning,” said Lu. “The Twitter corpus…is still evolving and emerging.”

Added Lu at the end: “Give us a try!”

Here is Microsoft’s press announcement on the deals with two of Silicon Valley’s innovation hotshots:

This morning at the Web 2.0 Summit in San Francisco, Qi Lu, President of Microsoft’s Online Services Division is announcing a new beta feature that enables people to easily search Twitter’s real-time information feed directly in Bing. This new feature helps people make better decisions and more fully understand Twitter conversations by collecting, analyzing and uniquely presenting real-time Twitter content.

More specifically, the new Twitter developments in Bing include:

A real-time index of the Tweets that match your search queries in results. This feature makes it easier to follow what’s going on by reducing the amount of duplicates, spam, and adult content.

Giving you the option to rank tweets either by most recent or by “best match,” where we consider a Tweeter’s popularity, interestingness of the tweet, and other indicators of quality and trustworthiness.

Providing the top links shared on Twitter around your specific search query by showcasing a few of the most relevant tweets. Additionally, Bing automatically expands those small URLs (like bit.ly) to enable you to understand what people are tweeting about. Instead of showing standard search result captions, we select 2 top tweets to give users a glimpse of the sentiment around the shared link.

You can try out the new Bing Twitter search beta here momentarily or learn more about it at the Bing blog. Please note that this is a U.S. only feature at this time.

Facebook Partnership

As part of his on-stage discussion at the summit, Dr. Lu is also announcing a global partnership with Facebook that will bring public Facebook status updates to Bing search results. The experience will be available at a later date.

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According to sources, Microsoft is close to striking a nonexclusive data-mining deal with Twitter to integrate the microblogging service’s full feed into the results of its Bing search service.

News of the deal, which was still being worked on by engineers and execs at both the software giant and the start-up as late as yesterday, could even come as early as today at the Web 2.0 Summit conference in San Francisco.

Qi Lu, the head of Microsoft’s online services division, is being interviewed at the event at 11:30 am PDT.

Note: Lu is scheduled to appear onstage after Yahoo (YHOO) CEO Carol Bartz, who is now too sick to attend, the company said. She also missed Yahoo’s third-quarter conference call due to an unspecified illness.

Thus, Lu is the main event of Web 2.0 tomorrow morning and it would be a good place to make a big announcement, if the talks are successful.

But sources close to the situation caution that the deal could still run into a snag and was not yet complete, although it seems more likely than not that a deal will soon be struck with Microsoft (MSFT) first and then Google (GOOG), which is the other company Twitter has been negotiating with.

BoomTown had previously reported that Twitter was in advanced talkswith both the search rivals about just such a real-time search arrangement.

There could be other possibilities on the table, said sources, such as one of the big companies advertising on Twitter or any number of other Twitter partnerships with either one.

When asked about the talks onstage at Web 2.0 yesterday, Twitter CEO Evan Williams turned coy, according to numerous reports, joking “Whose deals?”

But, in fact, Twitter, which is based in San Francisco, is very much engaged in dealmaking in this regard.

Here is what I wrote previously, as to what and why:

Sources said a number of scenarios are being discussed to compensate Twitter for its huge and potentially valuable trove of real-time and content-sharing information, generated from the data stream of billions of tweets from its 54 million monthly users.

These include a number of structures, including a payment of several million dollars to Twitter, along with various revenue-sharing proposals that would give Twitter a piece of the revenue made from search results.

The deals, stressed sources close to the situation, are nonexclusive, especially because Twitter’s management is keen to remain independent and also nonpartisan in the growing search battle between Google and Microsoft.

This means Yahoo–which recently struck a search-technology and online-advertising partnership with Microsoft–could also license Twitter’s feed to make its search results even more robust, although Boomtown could not determine if the company is in talks with the San Francisco start-up.

Sources said it is also possible that no agreement would be reached with either company.

And execs at Twitter, Microsoft and Google had no comment when asked about talks.

But doing these kinds of data deals with big search players does make a lot of sense, since it would be hard for Twitter to turbocharge its own search engine without running into the big cash-laden guns at both Google and Microsoft, which recently launched its new Bing search service.

Twitter is, instead, seeking to create a large open platform, which many could plug into, from search engines to marketers to publishers to developers.

Twitter has also been considering offering premium services to these groups and is contemplating some form of advertising offering.

But, most of all, Silicon Valley’s hot start-up is focusing now on spurring growth and engagement, along with fine-tuning its product offering.

Being deeply integrated into big search services would give Twitter a huge footprint.

Microsoft had already done a small experiment this past summer integrating Twitter data into search results, starting with tweets of bloggers like me.

How much indexing of its data Twitter will allow is unclear, but the company has certainly bought itself time to think carefully about all its options, given that it now has a lot of money in the bank.

Late last month, Twitter raised another $100 million in new funding, after already having raised $55 million.

This has given it a $1 billion valuation, despite negligible revenue.

The valuation also effectively stated that the innovative company was pretty much putting itself out of play to be acquired and is very interested in forging its own destiny.

Both Google and Microsoft execs have contemplated the idea of buying Twitter in the past, although no serious talks ever moved forward.

If they both strike data deals with Twitter, they will get the next best thing–an ability to offer all the information disseminated on Twitter in search results.

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