Digg buries Microsoft ad contract

Social-news site Digg has ended its advertising partnership with Microsoft more than a year before the deal was set to expire. Instead of relying on Microsoft as its exclusive ad partner, Digg will now primarily use the internal sales force it recently began building; Microsoft will handle remnant inventory.

"Starting July 1, Microsoft will sell network inventory for Digg through the Microsoft Media Network, which it has been doing successfully for the last year and a half," a statement from Microsoft read. "Digg has created its own internal sales executive team, and we respect their decision to sell their owned-and-operated site inventory directly to help further accelerate their growth as a company."

Digg's contract with Microsoft, intended to be a three-year deal, started in mid-2007, when the company chose it over Google. At the time, founder Kevin Rose applauded the decision because it would let Digg's employees focus on feature development while leaving ad sales to a more experienced team.

The revised contract is a blow to Microsoft, which touted the Digg deal as a big victory at its debut. But it also is yet another signal that advertising on the Web is changing significantly.

According to a ClickZ report, Digg's internal sales team will focus on "custom, non-IAB (Internet Advertising Bureau) inventory combined with standardized banner ads." This strategic decision--to move away from a reliance on the traditional IAB display units that have defined digital advertising for years--comes at a time when the best way to advertise on a social-media site is a matter of debate and uncertainty.

Social network Facebook also has a display ad contract with Microsoft (in addition to a $240 million investment) but has been putting more emphasis on the experimental "Engagement Ads" product that it packages and markets in-house. The News Corp.-owned MySpace, meanwhile, relies more heavily on traditional display ads.

By most accounts, MySpace is ahead of Facebook in the monetization game. It has a bigger foothold in the United States, where ad dollars are easier to come by than overseas, and it's willing to make advertising significantly more pervasive with full-page "wrap" campaigns--not to mention the fact that it has News Corp.'s media connections.

But with Digg choosing to go the Facebook route (sort of), especially given the bleak advertising climate, this could be a sign that more players in the tech industry have started to regard the next generation of digital ads as a more profitable route.

"It's not unusual for someone in the social media space to have a lot of custom units, because they're forging new territory," said Debra Williamson, a senior analyst at eMarketer. "A lot of people say that by the time the IAB comes out with a standard, the ad format is, (while) not necessarily passe, certainly not the cutting edge."

Williamson noted that not only is Digg changing its ad focus, it's looking to make new hires to expand its team. "That does put a stake in the ground, and it does say that a company like Digg is serious about looking beyond the banner, so as to speak, that they're really looking to develop new ways of advertising and that they're looking to bring on new people to help them do that."

Whether or not Madison Avenue will agree is a different story.

This post was expanded at 1:15 p.m. PT.

[eltoro2827]

digg? does anyone still use their crap?

[Vegaman_Dan]

Micorosft was handling their advertising needs on tthe Digg site.

Digg now has their own internal staff to do this and have cut back their requirements of Microsoft.

Those two are the simple facts. Now on to the spin doctoring of the commenters! :)

[monkeyfun14]

Wanna bet someone will spread FUD on MS here while just title skimming?

[jabberwolf]

Was it digg cutting back or being forced to cut back?
Digg has a habbit of creating its own spin on things.
It always had an internal staff for advertising, how else do you think that works?!?!

The fact is MS will have no ads, and it would be just like Digg to claim they initiated that status.

More likely they lost the MS account because they have lost so many viewers... oops that make too much sense there Vegaman_Dan ?!?!

[stigmattaman]

hmm, I was under the impression that by moving away from the IAB ads, it will make the ads harder to block. I think the vast majority of digg users have some form of ad block in there, so they may be able to get some good CPMs but no one's really seeing it.

[t8]

MCDonaldsoft is doing ads now.
Wow, first Bob, then Zune, now Ads.

[monkeyfun14]

Whats wrong with a company doing different products there's no law limiting a company to 4 or 5 products.

[t8]

Stretches the brand. Look what happened when Levis started making shoes, shirts, and everything else. They made more money, but their main product 'jeans' started to decline due to brand confusion. What about Cadillac making budget cars. They never recovered. Google is synonymous with the Internet and Microsoft with software and Windows. That is etched into people's minds. Hard to change that.

[mikeburek]

I think Digg is going to try to bring new products into web advertising, while MS was just distributing ads for companies who made the decision to use web advertising on their own.

Most ads are for a very few number of computer related products - GoDaddy, Netflix, Mozy, BestBuy... There are only so many dollars to go around. They need more companies to invest in web ads.

Also, if Digg could get a TV-type advertising contract instead of a web-type (click/impression based) contract, they would make lots more money. TV ads don't have any provable or trackable statistics, but companies will pay lots of money for the. Web based ads with click rate / impression stats / cookie tracking show enormous amounts of detail about a viewers, but these ads are selling for nothing compared to TV ads.