Facebook Does Ad Deal, But Not With Google

Facebook signed an advertising deal (update: also in NY Times) with Microsoft that will put Microsoft adCenter sponsored links and other ads on the Facebook site. There are no financial terms available for the deal, which runs through 2009.

This news is most notable because the partner that Facebook chose isn’t Google.

Google has been hyper aggressive in stalking the big advertising deals, going so far as to give 90% or more of total revenue to select partners (such as, reportedly, AOL and Ask), and guaranteeing nearly $1 billion to Myspace in a deal announced earlier this month.

Google is generally thought to generate more revenue per page than either Yahoo or Microsoft due to their method of choosing which ads go on top. While Yahoo places the highest bidding ad on top, Google also takes into account the click through rate on individual ads in deciding which go on top. This seemingly simple feature increases revenue substantially, and along with Google’s superior search product is the single biggest factor in Google’s financial success to date. Yahoo, it is worth noting, is developing a similar system, called Panama, which is rumored to be launching later this year.

When Google combines their more-effective platform with aggressive revenue sharing and guarantees, there is no room for Yahoo and Microsoft to compete.

Until today, that is. My hunch is that Microsoft bought this deal with a revenue guarantee and is flat out willing to take a loss to get into the game. Google would not let this deal, and the massive number of Facebook pageviews, go without a serious fight.

Thanks for the email tip, Noah.