Updated: Microsoft Extends Advertising Reach by Partnering with YuMe

UPDATE: YuMe tells us that the deal is a partnership, not an acquisition.

If the race between the Soviet Union and the United States to get the first man in space was coined “the Space Race,” perhaps we should call Google and Microsoft’s race to plaster the digital frontier with ads “the AdSpace Race.”

This week, Microsoft purchased YuMe, the largest provider of online video ads on the web. YuMe represents more than 500 million streams each month and reaches more than 68% of the total US online population (more than 120M uniques). YuMe will now offer advertisers MSN inventory and was also selected as the video ad platform to serve and manage all of Microsoft’s unsold and excess video inventory.

As part of the agreement Microsoft will also utilize NetworkMe, a capability of YuMe’s advertising platform that allows publishers to aggregate all of their video content into one private ad network, providing a consolidated view of available inventory. With NetworkMe a publisher gains unprecedented inventory liquidity and the ability to maximize CPMs and fill-rates across multiple properties.

Neither Microsoft nor YuMe published the financial terms of the deal.

Now that the Yahoo deal went south, the number of advertising networks Microsoft decides to buy out is anyone’s guess.