Microsoft’s fledgling Internet advertising effort, adCenter, signed up the Facebook social networking site:
Facebook and Microsoft Corp. today announced a strategic alliance in which the two companies will collaborate to bring relevant advertising to the more than 9 million registered users of Facebook, the Internet’s leading social directory. Microsoft’s advanced advertising technology and Facebook’s unique social network make possible the multiyear collaboration grounded in the two companies’ commitment to technological innovation.
As part of the relationship, Microsoft will be the exclusive provider of banner advertising and sponsored links on Facebook using Microsoft’s digital advertising solutions and the Microsoft® adCenter platform. The two companies also agreed to work together on future technology and advertising initiatives.
Advanced technology from Microsoft and Facebook will help connect advertisers with Facebook users in more relevant, innovative ways through a combination of graphical ad placements, as well as automated text-based advertisements targeted to content and, over time, aggregate user behavior on an anonymous basis.
The two companies began talks about the relationship only last week and expect the new advertising experiences to appear in the early fall. Microsoft and Facebook have expressed an interest in moving quickly to implement the terms of the deal.
Whew – someone was in a hurry to get hitched! No financial terms were announced and the deal is supposed to run through mid-2009.
If you aren’t familiar with Facebook, it started as a social networking site for US college students, but has broadened to cover the coveted general young adult demographic in the USA. Facebook competes with 100 million registered user MySpace which recently did a mega advertising deal with Google, and that’s likely the biggest part of the story according to Michael Arrington:
This news is most notable because the partner that Facebook chose isn’t Google.
Google has been hyper aggressive in stalking the big advertising deals, going so far as to give 90% or more of total revenue to select partners (such as, reportedly, AOL and Ask), and guaranteeing nearly $1 billion to Myspace in a deal announced earlier this month.
My hunch is that Microsoft bought this deal with a revenue guarantee and is flat out willing to take a loss to get into the game. Google would not let this deal, and the massive number of Facebook pageviews, go without a serious fight.
“It’s basically a consolation prize,’’ Phil Leigh, president of Inside Digital Media, a market research firm specializing in digital media, said of the deal. “But Facebook is also a legitimate test bed, a place where Microsoft can test new technology in a commercial context,’’ he said.
“What we’ll see is Microsoft attempt to do some fairly leading-edge type of things, involving banner ads, animation and interactivity,’’ he added. “Whatever technology they develop and use effectively in Facebook, they’ll be able to use it elsewhere.’’
Steve Berkowitz, senior vice president of the online services group for Microsoft, said ads would be made for Facebook, but they could also be aimed at any of MSN’s various Internet properties, which have a total of 400 million users worldwide. At the same time, ads running on MSN properties may also appear on Facebook, depending on what audience the advertiser wants to reach.
Mr. Berkowitz said the deal was “not comparable to the MySpace deal because we focused on the right economics for both parties.’’
We can’t begrudge Mr. Berkowitz some snarking, but since Google’s MySpace spend was the end result of a lengthy eyeball auction and this deal pretty much a quickie, the jury is still out.
Owen Van Natta, chief operating officer at Facebook, said: “We’ve had a number of conversations with folks about a number of different partnerships.’’
Must have been a busy week.
Update: Robert Guth has more on the background of the deal at the Wall Street Journal.