Facebook, Microsoft Sever Banner Ad Ties for Social Ads

By Clint Boulton  |  Posted 2010-02-08

Facebook will no longer be serving banner ads from Microsoft, but this isn't a sign that relations between the companies have grown cold.

Rather, social ads are growing up and it is time for Facebook to leverage them better, the social network and analysts who follow it believe.

Microsoft Bing General Manager Jon Tinter wrote in a blog post Feb. 5. that Facebook would begin selling its own display, or banner ads, instead of those provided by Microsoft.

These graphical display ads have been at the heart of the ad deal Microsoft first struck with Facebook in 2006, when the social network began featuring banner ads from Microsoft's AdCenter platform, and fortified in 2007.

When Tinter announced the change it was natural to ask whether Facebook had gotten frosty toward Microsoft, whose own social services and advertising plans are evolving.

A Facebook spokesperson said social ads perform better because they are targeted to people based on the information they provide, thereby providing a better user experience because they are more consistent with the look and feel of Facebook.

"This combination of targeting and social relevance is the primary driver behind the shift in strategy. Microsoft has been a great partner and we continue to work with them in other areas, including search."

Indeed, the companies also broadened their search pact to let Bing power Facebook's Web search in the U.S. and abroad.

Altimeter Group analyst Charlene Li said she was not surprised Microsoft and Facebook made this play, adding that Facebook and Microsoft remain tight and that Microsoft's display ads, "which really look awful inside of Facebook," aren't needed. She noted that Facebook can better serve social ads better than Microsoft.

"Microsoft simply doesn't have access to it, nor are the advertisers in the Microsoft network set up to handle social at this point," Li said. "This is an evolution, and something that both parties knew would happen soon."

Li further wondered if and when Microsoft and Facebook will partner to let Facebook offer social ads, via the Facebook Connect application to extend the social network to third-parties, to partner publishers that want to serve social ads on their sites.

"If they are using Facebook Connect for single sign-on and social commenting, they may be interested in social ads as well," Li said. "Microsoft would benefit by offering social ad options right within AdCenter, charging a pass-through fee to Facebook as it does other publishers."

Meanwhile, Microsoft will continue selling search ads on Facebook to bolster Bing, the software maker's new search engine aimed at challenging Google in the lopsided market for helping users find information on the Web.

Google commands 65 percent of market share in the United States, and almost 70 percent worldwide. Bing's market share sits at around 11 percent, according to comScore.

Facebook, which turned six years old Feb. 4, is in the midst of a redesign geared to improve the experience for its 400 million users.

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