Microsoft signs ad deal with Digg

Microsoft Corp. announced Wednesday that it has signed a deal with Digg, a popular user-recommendation news website that allows people to share and rate favorite news stories online, apparently leveraging its online advertising platform to boost the advertising revenues of the company.

In a statement yesterday, the software major Microsoft said it has entered into an exclusive three-year deal with Digg Inc., a reader-powered news site, under which it will exclusively provide display and contextual advertising on Digg.com.

“Our collaboration with Digg is about bringing our advertising technology and sales force to one of the fastest-growing sites on the Web and a true innovator in user-generated content,” said Steve Berkowitz, senior vice president of the Online Services Group at Microsoft. “We believe advertisers will welcome Microsoft and Digg’s combined strengths to forge more meaningful connections online.”

In collaboration with Digg's current advertising partner, Federated Media Publishing, Microsoft would bring new programs to the site's users and advertisers. The two companies will also work together on future technology and advertising initiatives.

“Federated Media has unique advertising sales assets that dovetail with our efforts, and we look forward to working with them,” Berkowitz said.

Microsoft’s latest ad deal comes as part of software giant’s efforts to compete in online advertising, especially against online advertising and internet search giant Google.

In order to expand itself in the advertising section and capture a bigger share of online advertising, Google recently has bought DoubleClick, which Microsoft also tried to acquire, for $3.1 billion. In June, the Internet powerhouse announced that it has acquired FeedBurner, a Chicago-based privately-held company that provides media distribution and audience engagement services for blogs and RSS feeds.

Adding more to its efforts to become a stronger competitor in the fight for online advertising revenue, Microsoft more than a week ago announced it would buy the online advertising company aQuantive of Seattle in a deal worth about $6 billion or $66.50 a share. The all-cash transaction, Microsoft's largest acquisition ever, is likely to complete next month after a vote by aQuantive shareholders.

Its deal with Digg also comes nearly a year after Microsoft entered into an exclusive deal to provide graphical display ads and sponsored links for social networking website Facebook. Under the multi-year agreement, the online social networking directory Facebook will use Microsoft's adcenter software to display ads to its more than 9 million subscribers.

Although, the financial terms of Microsoft-Digg agreement are not yet disclosed, but it is expected to go into effect in the coming weeks.

Launched on December 5th 2004, Digg is a community-based popularity website, which in a very short time has become the leading destination for people to discover and share the best content on the Web. According to Digg, more than 17 million unique users visit its Web site monthly.

Before signing ad deal with Microsoft, Digg had considered Google and Yahoo, who have both witnessed their online advertising platforms generating strong revenues, said Digg's CEO Jay Adelson. However, the company chose Microsoft as its exclusive partner for online advertising because of the level of customization the world’s leading software maker offered with its advertising platform.

"We at Digg couldn't think of a better partner to get to where we need to go," said Adelson. "They're a young ad service, they're innovative, they're willing to work with us on the cutting edge."

Shares of Microsoft dipped 9 cents to $30.71 in Wednesday NASDAQ trade.