Microsoft will hand over its display advertising business to AOL, with the latter selling all display formats including mobile and video on MSN, Outlook.com, Xbox, and Skype.
The deal between the two companies spans nine markets including UK, US, France, Germany, Italy, Japan, and Spain.
The move is reportedly going to help the software giant focus on its growing search advertising business based on Google rival Bing.
Under the 10-year agreement, Microsoft will power search and search advertising across the AOL portfolio of sites including Huffington Post and Engadget.
Microsoft said: "Today’s news is evidence of Microsoft’s increased focus on our strengths: in this case, search and search advertising and building great content and consumer services.
"The evolution in our approach to display advertising allows us to keep this focus, while working with industry leaders to market our services."
Microsoft also struck a 10-year deal with New York based AppNexus, a platform that specialises in real-time online advertising, to become the exclusive programmatic technology and sales partner across 10 markets.
The partnership will provide advertisers programmatic access to premium, brand-safe Microsoft inventory.
