MSN to offer paid ads similar to GoogleMarch 15, 2005 Microsoft plans to offer a service where advertisers will pay to be have their sites listed alongside its MSN search results, people familiar with the plans said. The service will be similar to competing programs from Google Inc. and Yahoo! Inc. Microsoft will announce a pilot program March 16, said the people, who asked not to be identified. These paid searches auction off placement next to Web search results to companies with related products. The program may help Redmond, Washington-based Microsoft, the world's biggest software maker, boost advertising revenue at its MSN Internet unit and revive sales growth. Microsoft's revenue will rise 8 percent this fiscal year, the lowest pace ever, after an average of 38 percent in the 1990s. The U.S. market for paid search will more than triple to $12.6 billion by 2010, according to Minneapolis-based Piper Jaffray Cos.  ``The goal for Microsoft is to capture more revenue and more control over the entire product,'' said Alan Davis, an analyst at Seattle-based McAdams Wright Ragen, which manages $2 billion including Microsoft shares. Trying to catch market leader Google, Microsoft last month released its first search engine built from scratch and still uses Yahoo's Overture unit for paid search. Microsoft spokeswoman Karen Redetzki declined to comment. Microsoft is holding briefings with reporters tomorrow, she said. MSN is holding a conference for its advertisers this week and plans to make the announcement there, the people said. Google's fourth-quarter sales doubled to more than $1 billion for the first time, fueled by advertising. Yahoo's fourth-quarter sales surged 62 percent, also surpassing $1 billion. Microsoft shares rose 2 cents to $25.11 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Shares of Mountain View, California-based Google fell $2.81 to $174.99 and Yahoo dropped 33 cents to $31.32. MSN has a contract to use Sunnyvale, California-based Yahoo's paid search service through June 2006. ``Clearly Yahoo is at risk for losing if not all at least a significant portion of the MSN business,'' Davis said. Microsoft probably won't replace Yahoo right away because ``it usually takes them a couple of iterations to perfect their products.'' The prototype is in its early stages, the people said. The service probably won't be ready for six months to a year, one person said. Yahoo spokeswoman Gaude Paez and Google's Steve Langdon didn't immediately return phone messages seeking comment.  MSN's entry into the market may start a price war for advertisers, said Martin Pyykkonen, an analyst at Janco Partners Inc. in Greenwood Village, Colorado. ``If you're MSN, you could go to the group of top 500 advertisers and say, `We'll give you X percent off the price you're getting from Yahoo and Google','' Pyykkonen said. He rates Yahoo shares ``buy'' and Google ``market perform.'' He doesn't own either stock. Microsoft has almost 10 times as much in cash and short-term investments as Yahoo and more than 16 times as much as Google, and winning customers with price cuts may be considered a ``pretty good use of cash,'' Pyykkonen said. Microsoft has spent $8 billion on MSN in the past four years. The unit, which lost a total of more than $1 billion in fiscal 2002 and 2003, posted its first annual profit in the most recent year, bolstered by more than $1 billion in Internet-ad revenue. MSN made up $588 million of Microsoft's $10.8 billion revenue in the most recent quarter. The company probably has spent $100 million to $300 million on efforts to build its own search capabilities, according to Rob Enderle, an analyst at San Jose, California-based Enderle Group. Yahoo has known that Microsoft was working on a competing product. Chief Executive Officer Terry Semel said at an investor conference in Palm Beach, Florida, March 1 that Microsoft may start its own paid-search advertising business. ``My guess is that at some moment in time there will likely be three networks instead of two,'' Semel said. ``There's plenty of room for three players in search.''  MSN already sells some slots in its search results to companies that advertise elsewhere on its Web sites. The company pays Overture to auction off the right to be listed when a certain keyword is searched. MSN's new service will be similar. MSN also will provide tools to advertisers to help them determine what search keywords to purchase and what type of ads are best for targeting their customers, one person said. The company wants to be able to sell a variety of different ads and services to customers, the person said. To contact the reporter on this story: To contact the editor responsible for this story: Source: Bloomberg News Read Serge Thibodeau's daily blogs on search engines at Serge Thibodeau Live. We strongly suggest you bookmark our web site by clicking here.  Tired of receiving unwanted spam in your in box? Get SpamArrest™ and put a stop to all that SPAM. Click here and get rid of SPAM forever! Get your business or company listed in the Global Business Listing directory and increase your business. It takes less then 24 hours to get a premium listing in the most powerful business search engine there is. Click here to find out all about it. 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