Microsoft to provide advertising for Digg

By Daisuke Wakabayashi

SEATTLE (Reuters) - Microsoft Corp. said on Wednesday it reached an agreement to be the exclusive provider of display and contextual advertising on Digg.com, a Web site that lets readers recommend articles to others.

Microsoft replaces Google Inc. as Digg's provider of display ads, boosting the world's largest software maker's efforts to gain a stronger footing in the growing online advertising market.

The two companies said the three-year agreement would go into effect in the coming weeks. Financial terms were not disclosed.

Digg, which said it has more than 17 million visitors a month, challenges the long-held journalistic assumption that editors know best what people want to read and allows readers to "digg," or vote for a story to push up its rankings.

Digg Chief Executive Jay Adelson said his company also considered partnerships with Google and Yahoo Inc, but chose Microsoft because of the level of customization the software maker offered with its advertising platform.

It also allows Digg, the most-visited Web site for technology news, according to online audience measurement firm Hitwise Inc, to focus on improving its site without having to create its own sales to sell banner advertising.

"This opens a whole category of (advertiser) inventory that wasn't available to Digg," said Forrester Research analyst Charlene Li.

After relinquishing an early advantage in the lucrative paid search advertising market, Microsoft is trying to catch up to Web rivals by clinching deals to broker display advertising with some of the hottest names in the "Web 2.0" phenomenon.