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August 23, 2006

Microsoft adCenter reels in Facebook

Posted by David Hunter at 7:59 AM ET.

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.

Katherine Q. Seelye at the NY Times:

“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.

Filed under Advertising, Alliances, Coopetition, Facebook, General Business, Google, MSN, Microsoft, MySpace, Online Services, adCenter

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10 Responses to “Microsoft adCenter reels in Facebook”

  1. Microsoft’s adCenter broadens contextual base with new beta -- Microsoft News Tracker Says:

    [...] Content Ads is Microsoft’s next product that allows advertisers to place content-targeted, text-based advertisements primarily on Microsoft-owned properties including MSN Money, Real Estate, and many others within the portal. … ContentAds will also be utilizing demographic targeting, geo-targeting and incremental bidding tools for all advertisements as well … There’s more by following the link, but Slegg’s point is that not only is Microsoft expanding their ad coverage to other MSN properties besides search, but it looks like they might be getting ready to include third party publishers as well. That would truly be getting to bat in the big leagues and one obvious candidate is Facebook, where the recent deal with Microsoft mentioned adCenter prominently. However, since adCenter also has aspirations to handle all of Microsoft’s advertising services including display ads, it may be a red herring for now. Filed under Coopetition, MSN, Beta and CTP, Google, General Business, adCenter, Yahoo, Ad-supported software, Microsoft   [Permalink] [TrackBack] [...]

  2. Yahoo looking at Facebook? -- Microsoft News Tracker Says:

    [...] Even if Microsoft isn’t currently in the running, a Yahoo acquisition will clearly put a damper on Microsoft’s big Facebook ad deal announced at the end of August. However, Michael Arrington at Techcrunch casts a jaundiced eye on the report: We’ve been through all of this before with Facebook, back in March. There isn’t much in the WSJ article to suggest that the talks are serious other than the unnamed source they cite. [...]

  3. Oops, there goes another Microsoft Web customer -- Microsoft News Tracker Says:

    [...] Also in question is social networking site, Facebook, with whom Microsoft prominently signed a big advertising contract in August. Now that Facebook is apparently in play, it is rumored they have negotiated a possible buyout of their Microsoft contract before the ink was even dry. Holly M. Sanders at the NY Post (via Inside Microsoft): Facebook, the hot social-networking site eyed by a number of media companies, agreed to pay a breakup fee to ad partner Microsoft if it should wind up in the arms of Yahoo! or another buyer, sources told The Post. [...]

  4. Does Steve Ballmer want to be your friend on Facebook? -- Microsoft News Tracker Says:

    [...] Perhaps it’s because I’m the only person in my household and seemingly the USA who doesn’t have a Facebook account, but I’d have to also ask why Microsoft would want to pay an outrageously high multiple for the latest Internet fad. They already have the advertising contract; do they really need the site itself? I guess I’m the only one with a sufficiently high estimate of Mr. Ballmer’s perspicacity as well.   Filed under Executives, Acquisitions, Coopetition, Steve Ballmer, General Business, Ad-supported software, Microsoft, Facebook   [Permalink] [TrackBack] [...]

  5. Microsoft Facebook alliance hits a rough spot? -- Microsoft News Tracker Says:

    [...] Almost exactly a year ago, Microsoft and the much hyped Facebook social networking Web site announced “a strategic alliance” around advertising which had them collaborating to bring relevant advertising to Facebook users and: 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. [...]

  6. Cash burning a hole in Microsoft’s pocket? -- Microsoft News Tracker Says:

    [...] Supposedly Facebook would dearly love the public valuation and could use a little walking around money, while Microsoft would love to demonstrate some trendy credentials and perhaps permanently lock in their Facebook advertising deal. [...]

  7. Microsoft and Google in Facebook bidding battle? -- Microsoft News Tracker Says:

    [...] I’ve previously found the purported rationales for this rumored Microsoft-Facebook deal a trifle wacky, but I guess common sense goes out the window when you are a slave to fashion. Presumably the best way to look at it is as just another eyeball auction although the the precise nature is unclear given Microsoft’s current “strategic advertising alliance” with Facebook and Facebook’s own advertising initiatives which seem just about to bear fruit.   Filed under Acquisitions, Alliances, Coopetition, Google, Microsoft, Facebook   [Permalink] [TrackBack] [...]

  8. Microsoft wins big bucks battle for a sliver of Facebook -- Microsoft News Tracker Says:

    [...] That would be 1.6% of Facebook which is quite a bit less than the 5-10% predicted by recent rumors, but it was at the highest rumored Facebook valuation of $15 billion. Microsoft’s original advertising alliance with Facebook was apparently US only although that wasn’t spelled out at the time. Predictably, there are also some features of this new deal which haven’t been revealed. [...]

  9. Microsoft a wallflower at the big Facebook bash -- Microsoft News Tracker Says:

    [...] Yesterday was Facebook’s big debut party for their new platform designed to milk some cash from their faithful members via “social” advertising. Any sarcasm on my part would be superfluous after Nicholas Carr’s application of a flamethrower, but one interesting aspect was that Microsoft, who a year ago was working with Facebook “on future technology and advertising initiatives” and recently bought a slice of the company, was relegated to the position of being merely one of 60 initial advertisers on the new platform. [...]

  10. Nuggets from Microsoft Financial Analyst Meeting 2008 | Microsoft News Tracker Says:

    [...] Facebook: Satya Nadella who helped Ballmer handle the online business (since Kevin Johnson was missing) revealed an extension of the Facebook advertising relationship: [...]

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