Digg Ends Exclusive Ad Deal with Microsoft

Digg is ending its two-year-old exclusive ad selling relationship with Microsoft, one year earlier than the deal was set to expire.

The two will continue working together on remnant and so-called “network reserve” inventory. Microsoft’s network reserve ads represent high visibility placements sold to advertisers on a blind basis.

But beginning in July, Digg will be solely responsible for all custom ad deals and a significant portion of its own Interactive Advertising Bureau standard ad inventory.

The partnership initially was supposed to last until summer 2010, but the two always had an understanding that Digg would at some point step up to rep the bulk of its own ads, according to Mike Maser, Digg chief revenue and strategy officer. He said the company’s internal sales efforts will focus on custom, non-IAB inventory combined with standardized banner ads.

“We’ve had a great relationship with Microsoft over the last year and a half,” said Maser.

Digg hired its first ad sales executive, former Yahoo sales exec Thomas Shin, in January, and is now recruiting a national sales force. The company said it would soon make regional sales appointments for the West Coast, Midwest, and East Coast. By the end of the year it hopes to hire a total of five to seven reps in San Francisco, the Los Angeles area, Chicago and New York.

Even though it will work with Digg on remnant inventory, Microsoft remains dedicated to high-engagement ad deals, according to Robin Domeniconi, VP U.S., Microsoft Advertising.

“We want to do custom,” said Domeniconi, who was appointed in December to oversee a dizzying array of ad products at Microsoft. Those products — represented by over 1,100 sellers — include MSN, Microsoft Media Network, Live Search, partner deals like those with Facebook and Digg, and game products like Massive and Xbox Live, among others.

Under her leadership, Microsoft is moving away from pitching those products individually. Rather, reps are proposing custom ad packages that combine non-standard advertising, premium display placements, and remnant ads across all its channels.

For instance, Discovery Channel recently graced Microsoft with its entire online ad budget for the fifth-season debut of “Deadliest Catch.” High-engagement placements spanned mobile, Web, gaming and other channels.

“I don’t believe [IAB standard ads] are the only thing the Internet is good for,” she said. “These types of packages let us get out of an ROI conversation.”