Microsoft, Best Buy Form Marketing Pact

Microsoft and Best Buy Thursday announced a strategic agreement that has each promoting the other — Microsoft on its 40-million-user MSN service, and Best Buy in its 350 stores.

Microsoft will also take a $200 million stake in Best Buy as part of the agreement. The deal comes on the heels of AOL‘s similar alliance with Circuit City.

In both partnerships, the players are seeking to trade what they possess in exchange for what they need online presence for real world store space.

These agreements also come at a time when a variety of online players are rapidly making partnerships with bricks-and-mortar retailers, trying to extend themselves from the virtual world into the real world.

The deal between Microsoft and Best Buy, the companies say, encompasses broadband, narrowband, in-store and online efforts. The agreement calls for a tight co-marketing bond, which will include joint promotions in various venues — in-store, print, broadcast, and online.

“At Microsoft, we’re designing products and services that empower our customers through great software — any time, any place and on any device,” says Bill Gates, chairman and CEO of Microsoft.

“Best Buy’s vision as the provider of products and services at the intersection of technology and life fits extremely well with our ‘Everyday Web’ strategy.”

As part of the alliance, Best Buy and BestBuy.com will receive prominent placement across Microsoft Web properties, including MSNBC, the Expedia.com travel service, Hotmail, the WebTV Network, and the newly launched MSN eShop online shopping service.

“This alliance positions Best Buy as the preferred click and mortar provider of entertainment and technology products and services to US consumers,” says Best Buy chairman and CEO Richard Schulze.

“A deciding factor in forming this alliance is Microsoft’s ‘Everyday Web’ vision, making the web as prevalent as the telephone and even more useful in our customers’ daily lives.”