Redmond will serve up display, contextual ads on news aggregator site, replacing Google as Digg's main advertising partner.
Microsoft replaces Google as Digg's main advertising partner, although Digg will continue to collaborate with Federated Media Publishing, which links up advertisers with blogs and other sites looking to monetize their content. Financial details of the agreement were not disclosed, but the deal is a three-year contract.
The revenue-sharing deal is a win for Microsoft, which last year snagged a similar deal with popular social-networking site Facebook shortly after losing the MySpace.com ad account to Google.
With social networks and community media sites attracting an increasing amount of ad dollars from portals and other sites, these deals mean big business for the ad partners. Digg has 17 million unique visitors per month.
Digg looked at Microsoft, Google and Yahoo before making a choice, said Digg Chief Executive Jay Adelson. "Microsoft came to the table with the best solution for our needs. We even spoke with Facebook, who we view as having similarities with our model, and they're very pleased with their relationship with Microsoft."
Microsoft executives were obviously pleased with the news. "They're such an innovator in this space and have such a unique audience that we can learn so much from them," Adam Sohn, director for Microsoft's online services group, said of Digg.
Digg co-founder Kevin Rose wrote in a blog posting: "This move gives us an advertising partner with a larger organization and a more scalable technology platform to keep pace with Digg's growth. Best of all, it lets the Digg team completely focus on new feature development."
Meanwhile, Digg will continue working with Federated Media on integrated sponsorships and custom programs, such as the in Digg labs, Rose said.
"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 evermore fascinating game of Internet chess," Federated Media Chief Executive John Battelle wrote in a blog posting.