UPDATE 2-Microsoft lands Viacom advertising, content deal
(Adds executive comments, background, byline)
By Kenneth Li
NEW YORK Dec 19 (Reuters) - Microsoft Corp (MSFT.O) won an estimated $500 million, 5-year Internet advertising deal with MTV Networks owner Viacom Inc VIAb.N, giving the software giant a boost against rivals Google Inc (GOOG.O) and Yahoo Inc (YHOO.O).
Microsoft will help Viacom place advertising on its network of entertainment Web sites in the U.S., such as MTV.com. Microsoft will also be the exclusive seller in the U.S. of remnant display advertising, which is ad space that Viacom has been unable to sell, company executives said on Wednesday.
The deal replaces online ad firm DoubleClick, whose services Viacom currently employs among other partners. Google, which Viacom sued for $1 billion for copyright infringement, is set to purchase DoubleClick for $3.1 billion.
The broad agreement involves Viacom's online games, television shows and films. Microsoft will license long- and short-form television and movies from Viacom for Microsoft's MSN Internet network and its Xbox 360 game system's online network.
The deal is seen as a coup for Microsoft's Atlas advertising platform as it makes inroads against Google Inc and Yahoo Inc in the overall online advertising business, which Microsoft has estimated at $80 billion by 2010.
Each company has raced to purchase new advertising businesses and lock in exclusive agreements.
Yahoo signed a deal in April with Viacom to provide search advertising for 33 of its Web sites, which remains in place. Viacom's properties include the Paramount movie studio, and MTV and Comedy Central cable television networks.
Redmond, Washington-based Microsoft in August made its biggest purchase ever in the $6 billion acquisition of digital ad firm aQuantive in an effort to transform into one of the Web's top two players in the online ad market in three to five years.
About 50 Web publishers have signed on to use Microsoft's ad platform since it announced the aQuantive deal in May, said Kevin Johnson, Microsoft's president of platforms and services. "This deal is another milestone in our quest to build a world-class advertising platform," he said in a phone interview.
In October, Microsoft sealed the exclusive rights to sell ads outside of the United States for Facebook, and it also purchased a small stake in the popular Internet social network.
As part of the Viacom deal, Microsoft also agreed to buy ads on the media company's broadcast and online networks over five years and to help Viacom establish itself as a publishing partner on Microsoft's casual Internet gaming sites.
"We are always in discussion with Microsoft," Viacom Chief Executive Philippe Dauman said in a phone interview. "This broad-based relationship will lead to conversations in other business areas."
Responding to a question of what other areas, Dauman said video games development could be one arena in which the two companies could work together.
Viacom, which also announced on Wednesday a splashy development deal with "Pirates of the Caribbean" and "Top Gun" producer Jerry Bruckheimer, sees online games and those played on game systems as a major pillar of growth.
"What impressed me was the extent to which Microsoft is making the commitment, technological, financial and otherwise to be a winner in this space," Dauman said.
Microsoft shares were up 20 cents to $34.94 in early trading on the Nasdaq, while Viacom shares were up 1.8 percent, or 76 cents, at $43.83 on the New York Stock Exchange. (Reporting by Kenneth Li; Editing by Steve Orlofsky and Derek Caney)
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