RealTime IT News

Confirmed: Microsoft and Facebook Friendship

If MySpace and Google can strike their own ad deal, then Facebook and Microsoft can't be far behind.

Microsoft is now the exclusive provider of brand advertising and sponsored links on the Facebook social network of more than 9 million registered users.

The arrangement is a chance for Microsoft to show off its relatively new adCenter platform. Options for advertisers will include graphical ad placements and automated text-based advertisements contextually targeted with content.

Microsoft will also take advantage of Facebook's intimate knowledge of its users and their aggregate behavior by allowing advertisers to precisely target their audience.

User data will be accessible to Microsoft, though on an anonymous basis.

The two companies also said they plan to work together on future technology and advertising initiatives. Terms of the deal were not disclosed.

The deal is similar to the Google/MySpace partnership, a three-year, $900 million deal to provide search and advertising through MySpace.com, IGN and other Fox Interactive Media Web sites owned by the with parent company News Corp. Facebook holds 7.51 percent of the social networking market as of Aug. 19, according to Web metrics firm Hitwise. That's good for second-place in the industry after MySpace's 82.26 percent dominance in the social networking category, according to Hitwise stats.

But despite its second-place popularity, Facebook and most social networks have not yet figured out a way to successfully leverage and monetize their access to the crucial 18-25 year-old demographic.

The obviously play would be to sell space to brand advertisers, but since the content on Facebook and other social networks is mostly user-generated, brand managers are typically wary.

"If I've got a tried-and-true brand that's been around for decades, I don't want to find it hanging out with some video of a kid jumping off his roof and hurting himself," Forrester Research Analyst Brian Haven told internetnews.com.

By partnering with Microsoft to serve contextual ads, Facebook is hooking itself up to the type of advertisements that helped drive Internet advertising revenue growth by 30 percent in 2005.

And, by offering its detailed demographic data to Microsoft, Facebook might be able to sell graphical ad space to brands whose guidelines call for the sort of unbridled content users generate on social networking sites.

Microsoft benefits by adding inventory to its growing advertising business and gets it with an industry player before Google gets there.