March 14, 2005 11:58 pm

Microsoft adds search-linked ads to arsenal

Microsoft will on Wednesday signal a direct assault on one of the main profit-generators of Google and Yahoo when it unveils an advertising service that lets users link their messages to the results of internet searches.

Though widely expected, confirmation of the software giant's plan to build its own advertising network around its search engine will intensify competition in the fastest-growing corner of the online advertising market. Microsoft officially launched its own search engine this year, although it has continued to rely on Yahoo to sell advertising on the service.

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The advertising initiative to be unveiled tomorrow is at a relatively early stage of development and Microsoft is likely to continue to rely on the Yahoo service for the next six to 12 months, said one person familiar with the company's plans. Microsoft refused to comment.

Microsoft already sells some of the advertising that is linked to the search engine on its MSN internet service. Through established relationships with many big advertisers who buy regular ?branded? advertising on MSN, it also sells ?keyword? advertising linked to searches, particularly for the most common search terms.

However, the software company relies on Yahoo to reach the many medium-sized and smaller companies which have turned to search engine advertising, and to sell ads tied to a wide array of search terms. By selling direct to advertisers, it would no longer have to share advertising revenue with Yahoo.

Microsoft's latest salvo comes amid other signs that competition in the search advertising business is set to become more intense. Yahoo is reported to be close to launching a service that would place adverts on the web pages of other online publishers a direct attack on Google's AdSense programme.

While it has not yet shown its hand, Yahoo has said that it plans to introduce products and services for online publishers, including publishing tools and ?advertising products?.

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