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Digg Mines Microsoft for Ad Help

Digg is looking to grow its advertising revenue with the help of a new, big partner – Microsoft. The software giant and Digg, the popular content aggregation and rating site, announced an agreement to collaborate to bring relevant advertising to Digg's over 17 million unique monthly visitors.

As part of the agreement, which is for three years, Microsoft  will be the exclusive provider of display and contextual advertising on Digg. The two companies also agreed to work together on future technology and advertising initiatives. Financial details were not disclosed.

The deal might be a blow to current Digg ad partner Federated Media, though none of the parties characterized it that way. The companies released a statement that Microsoft plans to work with Federated to bring integrated programs to Digg's users and advertisers.

"Federated Media has unique advertising sales assets that dovetail with our efforts, and we look forward to working with them," said Steve Berkowitz, senior vice president of the Online Services Group at Microsoft in a statement.

Jupiter Research analyst Emily Riley said Federated and Microsoft could provide healthy competition, which would benefit Digg. "Digg sees an opportunity to increase the competition for ads on their site and that generally increases revenue," Riley told internetnews.com. "Federated's a bit more of a specialist and premium-oriented, while big providers like Microsoft and Google bring depth and more contextual ads."

Federated CEO John Battelle also put a positive spin on the deal in a blog posting.

"It's no secret that Digg is the kind of property - like Facebook - that was bound to get the attention of the Big Guys as they continue to play an ever more fascinating game of Internet chess. That's why I'm even more pleased that FM is continuing to work with Digg and with Microsoft to further Digg's goals."

Digg CEO Kevin Rose also made a brief mention of the deal in his company's blog, noting that the deal is similar to one Facebook signed with Microsoft last year.