Microsoft, Viacom Announce Broad Digital PartnershipMicrosoft, Viacom Announce Broad Digital Partnership

Microsoft and Viacom on Wednesday announced a sweeping, five-year alliance that will see the computer and entertainment giants partner on the creation and distribution of digital advertising and content and work jointly to promote each other's products and services.

The deal is worth about $500 million, the companies said.

The agreement calls for Microsoft and Viacom to work cooperatively on a broad range of digital ventures. Among other things, Microsoft will license content from Viacom entertainment brands such as MTV, Comedy Central, and Paramount Pictures for distribution over its MSN Web sites and Xbox Live online gaming platform.

Additionally, Microsoft's Atlas division will become the digital ad server for Viacom's U.S. web sites. Microsoft also gets the exclusive right to sell remnant display advertising on the sites.

Microsoft said further that it plans to buy advertising space on Viacom's broadcast and online networks over the agreement's lifespan and work jointly with Viacom to create promotions for the MTV and BET Networks.

Viacom president and CEO Philippe Dauman in a statement called the deal "a novel and comprehensive partnership that demonstrates the scale of our digital operation." Microsoft Platforms & Services division president Kevin Johnson, also in a statement, said the agreement will help Microsoft's "quest to build a world-class advertising platform."

The deal marks the latest effort by Microsoft to establish a bigger footprint in the fast growing digital advertising and content markets. Last week, the company struck a pact with CNBC under which it became the financial network's provider of digital ad serving services.

Earlier this year, Microsoft agreed to pay $6 billion to acquire Atlas and its parent company -- online ad agency aQuantive.

In building out its digital advertising capabilities, Microsoft is hoping to compete head on with rivals Google and Yahoo -- both of which are currently well ahead of the software maker in terms of generating search engine traffic that drives a significant portion of online ad sales.

As of October, Google held 57% of search traffic, Yahoo commanded 23.7% of the market, while Microsoft controlled just 10.3%, according to market watcher comScore.