Under a revised agreement, the software giant will continue selling remnant and "network reserve" inventory, or higher-quality placements sold on a blind basis.
ClickZ reported Monday that Digg's internal sales force will focus on selling non-standard custom inventory along with a significant portion of its standard IAB units.
The move follows Digg's recruiting of former Yahoo executive Thomas Shin in January to build a direct sales team to better monetize the site. The company had cut 10% of its 75-person workforce shortly before announcing Shin's hiring. Digg expects to have a national sales team of five to seven reps by year's end.
"This was sort of a natural evolution of where we thought the business would go," said Mike Maser, chief revenue and strategy officer for Digg. He added the company would maintain its three-year ad partnership with Microsoft under the amended terms until October 2010.
In a statement, Microsoft said: "Digg has created its own internal sales executive team, and we respect their decision to sell their owned-and-operated site inventory directly to help further accelerate their growth as a company."
Microsoft also has a display ad deal with Facebook, in which it invested $240 million in 2007.