Microsoft signs online ad deal with Viacom

Microsoft Corp., the world’s largest software maker, and the US media conglomerate Viacom Inc. on Wednesday cemented an Internet advertising and content partnership, under which the two companies will provide about $500 million in services to each other over five years.

As part of the wide-ranging deal, Microsoft will license television shows and movie content from New York-based Viacom for use on its MSN Web site as well as on its Xbox 360 gaming platform, and in turn MTV Networks owner Viacom will allow software giant serve up ads on its U.S. Web sites, the companies said in a statement.

To deliver Viacom's advertising to the American sites, Microsoft will use Atlas technology which it obtained with the $6 billion purchase of aQuantive.

Microsoft will be able to put programming from Viacom's MTV, Comedy Central and BET cable networks as well as movies from Paramount studio onto its various platforms, including MSN and Xbox 360 video-game system.

Microsoft already distributes some Viacom content though Xbox Live Marketplace, a virtual market for Xbox 360 users, which allows members to download media content. It offers movie trailers, game demonstrations, Xbox Live Arcade games amongst other services. Launched on November 22, 2006, the service has roped in content partners such as CBS, TBS, UFC, NBC, MTV Networks, Paramount Pictures, and Warner Bros, Home Entertainment.

In addition, Microsoft will have the exclusive right to market Viacom's unsold display advertising space on its US Web sites.

"This is a novel and comprehensive partnership that demonstrates the scale of our digital operation and the value of our branded content across all distribution platforms," Viacom CEO Philippe Dauman said in a statement.

Kevin Johnson, President of Microsoft's Platforms and Services Division, touted the deal as "another milestone” in company’s efforts to build a world-class advertising platform.

The two companies also agreed to work together on promotions and sponsorships for award shows on MTV Networks and BET Networks. Neither Microsoft nor Viacom disclosed the financial terms of the deal, but the two valued the five-year arrangement at more than $500 million. The ad revenue will be distributed between the two companies.

Microsoft’s latest ad deal comes as part of Redmond, Washington-based software company’s efforts to compete in online advertising, especially against online advertising and internet search giants Google and Yahoo!.

In order to expand itself in the advertising section and capture a monster share of online advertising, Google first 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.

Internet giant Yahoo Inc. completed in September its first business arrangement with a social networking site, Bebo Inc. The deal with Bebo allows Yahoo to sell display advertising for the social networking site in two countries where it is immensely popular, U.K. and Ireland. Site traffic data from comScore Networks Inc. shows 75 percent of Internet users in these two countries use Bebo.

Adding more to its efforts to become a stronger competitor in the fight for online advertising revenue, Microsoft in May said it agreed to buy online-ad 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, was completed in August.