MSN vs. Google and Yahoo, Round 3
Published: March 15, 2005, 7:41 PM PST
By Stefanie Olsen 
Staff Writer, CNET News.com

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Microsoft CEO Steve Ballmer is expected to show off a new paid-search service
on Wednesday that will eventually go toe-to-toe with rival Google and supplant
partner Yahoo's advertising. 

As previously reported, Microsoft's Internet group is developing a
pay-per-click ad-bidding system that pairs search results with sponsored text
messages from advertisers. Yahoo's Overture Services currently supplies MSN
with sponsored search links, which complement MSN-sold "featured sites." 

But the new MSN service, called AdCenter and set to roll out in Singapore and
France in the coming months, will bump Overture ads in the long run and let MSN
own a major source of its advertising revenue. (Microsoft splits fees collected
from marketers with Overture.) 

News.context

What's new:
MSN is set to show off its version of a system for selling text ads linked to
search queries and results, a direct challenge to market leaders Google and
Yahoo.

Bottom line:

Microsoft's Internet group is hungry for a bigger piece of the
multibillion-dollar ad business related to search, and the new service will
eventually allow it to jettison a deal with Yahoo's Overture Services. That
agreement provides ad revenue but requires MSN to split the money with Yahoo.

More stories on this topic 
Microsoft does not have a specific date for a U.S. launch, but it envisions
operating the ad network globally, said Adam Sohn, an MSN spokesman. 

"Call this the third leg of the search stool," said Sohn. "First, we introduced
algorithmic search, then desktop (search), which is still in beta, and now the
advertising platform." 

With the product, Microsoft will move into the mother lode of a
multibillion-dollar ad business dominated by Google and Yahoo. Search-engine
marketing is expected to be worth as much as $5 billion this year, and nearly
$9 billion annually within four years, according to Jupiter Research.
Microsoft's piece of the pie is smaller than the shares enjoyed by market
leaders Yahoo and Google, and the software giant is hungry for more. 

Google fields 35.1 percent of the searches online, followed by Yahoo at 31.8
percent and MSN at 16 percent, according to ComScore QSearch. If the number of
searches translates to the percentage of the ad market, MSN generates roughly
$1.6 billion annually from search, minus the portion shared with Overture. 

MSN's product is far from fully baked, according to Sohn, but it could
eventually crowd rivals, search engine watchers say. Given that there is a
finite number of searches conducted on the Internet, and hence a limited number
of opportunities to display search-related ads, MSN will grab ad dollars away
from Yahoo and Google, they say. According to data from ComScore QSearch, there
were roughly 4.9 billion search queries in the United States during the month
of January. 

"The big pie of searches out there isn't getting any bigger" because of MSN's
ad platform, said industry expert Danny Sullivan. "All that's 

Continued ...
