Social news site Digg is axing its ad partnership with Microsoft a full year before the deal is set to expire - and will rely on its own sales force to sell ad inventory, CNET reports.

The 3-year contract, which began in mid-2007, was a big win for Microsoft, beating Google for ad selling on a site with over 17 million visitors a month. (In March '08, Microsoft and Google reportedly had a small and uneventful bidding war over Digg.)

At the time, the deal was meant to let Digg's employees focus on feature development rather than ad sales.

But according to Mike Maser, Digg chief revenue and strategy officer, the two companies always had "an understanding" that Digg would eventually sell most of its own ads, writes TechCrunch.

And that's exactly what it's going to do: Digg will develop its internal sales team to sell the ads, making more money on each deal. It will continue to work with Microsoft on remnant and so-called "network reserve" inventory, or high visibility placements sold to advertisers on a blind basis.

Digg also decided to move away from traditional IAB (Internet Advertising Bureau) display units and instead create custom inventory combined with standardized banner ads.

Microsoft, too, spoke out about its commitment to high-engagement ad sales, and across mobile, web, gaming, and other channels. Company reps are pitching custom ad packages that combine non-standard advertising, premium display placements, and remnant ads across channels.

Facebook, which also has a display ad contract with Microsoft (and a $240 million investment) has been putting more emphasis on its own "engagement" ads.