Washington — Social-news portal site Digg is terminating its three year exclusive online advertising relationship with Microsoft more than a year earlier that the deal was was originally set to expire, according to ClickZ.
Rather than depending on Microsoft as its exclusive ad partner, Digg will now basically employ its internal sales force it recently began building to sell its own ads in custom non-industry standard formats, as well as some ads that conform to IAB standards.
Microsoft will continue to handle remnant inventory ads for Digg.
“Beginning July 1, Microsoft will sell network inventory for Digg through the Microsoft Media Network, which it has been executing 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 agreement with Microsoft, initially proposed to be a three-year deal, started in mid-2007, when the company chose it over Google. At the time, founder Kevin Rose praised the decision because it would let Digg’s employees focus on feature development while leaving ad sales to a more experienced team.
The partnership between the two was supposed to last until mid-2010, but according to Mike Maser, Digg’s chief revenue and strategy officer, the two always had an understanding that Digg would at some point start selling the majority of its own ads. He added that the company’s internal sales efforts will focus on custom, non-IAB inventory combined with standardized banner ads.
The revised agreement inflicts a disappointing blow to Microsoft, which exaggerated 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.
Like most social networking sites, the key to making money at Digg is big, flashy, custom campaigns for advertisers relevant to Digg’s tech-savvy audience — not boring banner ads that many Digg users block, anyway. Digg will get the most bang for its buck selling those campaigns itself, not sharing the revenue with Microsoft.
According to ClickZ report, Digg’s internal sales team will focus on “custom, non-IAB (Internet Advertising Bureau) inventory combined with standardized banner ads.” This crucial 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.
But with Digg opting to follow the Facebook route, 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.
Nevertheless, for its part, Microsoft is attempting to expand its ad blitz opportunities like the one it just did with Discovery Channel and the “Deadliest Catch” season premiere. Robin Domeniconi, VP U.S., Microsoft Advertising told ClickZ that the blitzes get Microsoft away from conversations about ROI.
“It is not amazing for someone in the social media space to have a lot of custom units, because they are 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 outmoded, certainly not the cutting edge.”