SEATTLE, WA – According to reports, Microsoft will introduce on Wednesday a new program that will offer search engine ad sales in a manner similar to current programs offered by Google and Yahoo.Although Microsoft’s MSN search engine already returns sponsored ad listings along with search results, these ads have previously been supplied exclusively through partnerships with third parties. Microsoft will continue to provide some sponsored listings through its current agreement with Overture, which runs into 2006, but for the first time it will also offer its own sponsored listings.
Some analysts believe that Microsoft’s entry into sponsored ad listings will only spur market growth in paid search advertising.
“Microsoft developing into the third major paid online search advertising platform is likely to support market growth as Global 2000 corporate clients find additional keyword inventory available,” wrote internet analyst David Garrity of Carris and Company.
Earlier this year Microsoft switched from using third party Inktomi’s search technologies over to its own internally developed search software, an important milestone in its plans to compete more directly with Yahoo and Google for a larger slice of the search market. The development of that software reportedly delayed Microsoft’s plans to enter the paid search market as an independent player.
“It seems logical that Microsoft would want to wean themselves off of their competitor’s monetization engine over time,” said Rick Sherlund, an analyst with Goldman Sachs.
Even sharing profits with Overture, Microsoft still saw paid search ads bring significant revenue gains to its overall search profits. In its most recently reported quarter, Microsoft reported that 57% of MSN revenue came from advertisements. MSN has seen a 20% revenue jump from the same quarter of three years ago – from $372 million to $588 million.
Google is currently the number one most-visited search engine, with Yahoo in second place and MSN in third.
According to published estimates, the paid search engine market will be worth somewhere between $4 billion and $5 billion in 2005, and Microsoft wants to control the profits from its portion of the search engine market rather than share them with competitors.
“I think a lot of people knew that Microsoft might eventually get into this business,” said Matt Rosoff, an analyst with the research firm Directions on Microsoft.
