Facebook Ends Microsoft (MSFT) Banner Ad Deal

Privately held Facebook has ended its deal with Microsoft Corporation (Nasdaq: MSFT) that had Microsoft providing the banner ads that were displayed on Facebook.

Although the deal was supposed to run until 2011, the two companies did not disclose whether or not Facebook would compensate Microsoft for ending the deal early. The two companies still have a close relationship with Microsoft a backer of Facebook, having paid $240 million in 2007 for a 1.6% share of the social networking site.

Microsoft will continue providing Web search on Facebook and a deal in which Microsoft provides text based search ads on Facebook was extended beyond 2011.

Facebook is making the change to better target users because it has access to much of their personal information.

"Ad formats that feature social actions perform better and provide a better user experience since they are more consistent with the look and feel of Facebook," Facebook said in a statement. "This combination of targeting and social relevance is the primary driver behind the shift in strategy."

The move comes as Facebook has emerged as one of the most visited sites on the internet, challenging veterans like Yahoo! Inc. (Nasdaq: YHOO) and Google Inc. (Nasdaq: GOOG), and begins to focus more on financial results.