Microsoft signs advertising agreement with Digg

In a deal that boosts Microsoft’s plan to increase revenue from online  advertising, the company will be the exclusive provider of display and contextual advertising on the popular Digg news site.

Few details are known at this point, although Digg creator Kevin Rose says it’s “similar to the one Facebook signed with Microsoft last year.” This means that Digg will turn over control the site’s advertising exclusively to Microsoft and its adCenter platform.

adCenter works much like Google’s AdWords program: advertisers bid on keywords, and the service targets ads to related pages. Unlike with traditional graphical banners, advertisers only pay when they receive a click, although Google is now serving some impression-based ad campaigns in addition to text links.

Microsoft likely offered Digg a minimum revenue guarantee as it had reportedly done for Facebook. This means the company will be losing money in the near-term, but such deals are crucial if Microsoft wants to establish itself in the marketplace. It needs high-profile sites and big visitor numbers to attract ad dollars away from Google, Yahoo and AOL.

According to Microsoft, the deal will last for three years.

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Tags: Google, Microsoft, Yahoo