Microsoft to Provide and Sell Ads on Facebook, the Web Site
Microsoft said yesterday that it would provide advertising for Facebook, a Web site aimed primarily at college students, over the next three years.
The two did not disclose the terms of the deal, in which Microsoft will be the exclusive seller and provider of banner advertising and sponsored links for Facebook. The site, a social network that allows users to set up pages about themselves, post pictures and create discussions, attracts a youthful demographic that is highly prized by advertisers.
The deal follows an announcement earlier this month that Google had agreed to pay a minimum of $900 million over three and a half years to the News Corporation to provide search functions and advertising to MySpace.com, the hugely popular social networking site.
Microsoft was one of the competitors for the deal with MySpace, which earlier this month registered its 100 millionth user, compared with Facebook’s 9 million registered users. “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.’’
Facebook directs its own advertising now but under the deal will outsource it exclusively to Microsoft until mid-2009. The ads are to start appearing in the fall.
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.
The deal gives advertisers access to Facebook’s audience of young, educated spenders. The site, founded in 2004, was once limited to college students, but with the growing popularity of MySpace, it has allowed access by recent college graduates, high school students and employees of certain companies.
Microsoft will link advertisers with this audience using what the companies described in a statement as “graphical ad placements as well as automated text-based advertisements targeted to content, and over time, aggregate user behavior on an anonymous basis.’’
Mr. Berkowitz said the deal was “not comparable to the MySpace deal because we focused on the right economics for both parties.’’
Facebook and Microsoft executives said they began their talks late last week. Owen Van Natta, chief operating officer at Facebook, said: “We’ve had a number of conversations with folks about a number of different partnerships.’’