• by Laurie Sullivan  @lauriesullivan, December 20, 2007

The media conglomerate behind Paramount Studios, MTV and Nickelodeon has handed Microsoft a five-year advertising deal. Viacom reported Wednesday signing the content and distribution partnership, saying it will rely on the Redmond, Wash. company to sell online advertising remnants and distribute and serve up ads, as well as develop several Web sites to market awards shows.

Microsoft's Atlas unit, part of aQuantive acquired for $6 billion in August, becomes the exclusive ad server for Viacom's more than six U.S. Web sites through Atlas adManager. It lets Microsoft license video programming for its online network MSN, and Xbox 360 game platform. Since much of Viacom's content is already available to Xbox 360 users through the Xbox Live Marketplace, the deal mainly adds entertainment from BET Networks.

Atlas adManager, an advertising platform written in Microsoft development code C++ and C#, allows publishers such as Viacom to create advertising inventory, as well as to price, target and distribute ads. Part of the technology built into the platform was acquired with ad-serving company Accipiter. The application makes the decisions on when and how ads are bought, targeted and sold for Web pages.

The financial terms were not disclosed, but the companies estimate the deal at $500 million during the first five years. If that's not enough, it also gives Microsoft bragging rights, demonstrating the company's latest successful effort to build an ad business.

"We have won about 50 deals since acquiring Atlas in the fall, but this is by far the largest," says Yusuf Mehdi, Microsoft's senior vice president/strategic partnerships for the platform and services division, suggesting it may trump the 100-year deal with NBC. "We're also partnered with Fox to power the sports channel."

Microsoft struck an agreement with CNBC.com last week to take over the display and contextual ad-serving task previously handled by DoubleClick. Microsoft also has existing third-party syndication deals with Facebook, Digg.com and the photo-sharing social network Piczo.com.

Microsoft has come from behind to provide ad services in a market where Google has historically dominated. Google, which acquired YouTube in 2006, has been busy defending its $1.65 billion acquisition against copyright and intellectual property licensing allegations. Viacom brought a $1 billion lawsuit against Google for not preventing users from uploading clips of hit shows like "The Daily Show" and "The Colbert Report" onto YouTube.

"Microsoft is feeding off the fruits of the anti-Google sentiment," says Marissa Gluck, managing partner at Radar Research in Los Angeles. "Not everyone hates Google, but Viacom can't use their ad services if they're suing them. It doesn't leave Viacom with much choice, and puts Microsoft in a powerful bargaining position."

Meanwhile, the two companies in the coming weeks will work to transition Viacom's internally built systems along with those supported by DoubleClick to Microsoft platforms. The migration requires switching advertising tags on the sites, checking software and system compatibility, and ensuring the Web sites automatically connect with Microsoft's technology serving up ads.

"The deal with Viacom spans everything from ad serving to ad selling to content distribution to events and promotions, across multiple devices, as well as future areas of collaboration that I can't talk about now but will later on," Mehdi says.