Under the agreement, AOL will take over management and sales of display, mobile and video advertising that appears on Xbox, Skype and other Microsoft products in the United States, Canada, Japan, Brazil and five European countries. The move takes Microsoft largely out of the display ad business while giving AOL access to some of the web's most popular destinations.
In turn, Microsoft's search engine, Bing, will power search results and search advertising on AOL websites. The arrangement could lift Bing, long a second fiddle to Google, which is being displaced as the search engine of choice on AOL sites.
"For us, it's another piece of validation for how far we've taken Bing in six years," said Rik van der Kooi, corporate vice president at Microsoft.
The deal is the latest of several by Microsoft to focus on its core products, an effort pushed by Satya Nadella, its chief executive. Last week, Nadella released a new mission statement for Microsoft: "Empower every person and every organization on the planet to achieve more."
As part of the deal, AOL said that it will extend job offers to about 1,200 Microsoft workers in sales, marketing, engineering and other areas. Both companies insisted there would be no job cuts because of the deal.
While display advertising is a tiny slice of Microsoft's revenue, it is central to AOL, which will gain access to Microsoft's youngest, most sought-after users.
The two companies will split money made from ads sold on each other's products, according a revenue-sharing arrangement, the terms of which have not been disclosed. The deal will last 10 years, the companies said.
Microsoft, at 40 years old, and AOL, at 32, are ancient in Internet terms and continue to change their online roles in an era when ad dollars are being gobbled up by Google and, more recently, Facebook. But they still have some popular digital destinations, including the MSN portal for Microsoft and The Huffington Post news site for AOL.
"Think about me being able to sell the Huffington Post and Xbox together," said Bob Lord, president of AOL. "That's really compelling to advertisers."
© 2015 New York Times News Service