Microsoft gave the world a glimpse of its new me too strategy in the online ad space yesterday by giving Yahoo the flick and launching its own new internet ad business called adCenter.

Microsoft, which had used Yahoo's Overture system to deliver ads for its searches, believes that it can beat Google and Yahoo at their own game with its new technology which it believes is superior. AdCentre will offer features such as demographically and geographically targeted online campaigns.

Last year the internet advertising market in the US was about $12.5 billion, of which Google got 49%, Yahoo 22% and Microsoft a comparatively lowly 11%. Some market pundits have even speculated that the commercial relationship between Microsoft and Yahoo, who are both eyeing the number player Google enviously, might one day expand into a merger. However, the launch of adCenter should scotch any further talk for the time being.

The pay per click service will be delivered on Microsoft new Windows Live Search platform, which will replace its disappointing MSN Search service. Microsoft is currently in a $2 billion gear up mode to make itself more relevant in the online space. A major part of that effort is to increase its search engine market share so that it can get a bigger piece of online advertising pie which is expected to grow by about 25% this year.

Microsoft's aggressive push to increase its search engine market share, however, has been met with stiff resistance from the market leader Google. Microsoft plans to make Windows Live Search the default search box on its upcoming Internet Explorer 7 browser, which currently has 85% market share. As a result, Google has lodged complaints with the US Department of Justice and the European Commission, alleging the move is anti-competitive. Google pays millions to Mozilla to have its search box on the Firefox browser, which has 11% market share.

While Google is generally acknowledged to have the best search engine technology, Microsoft claims that its new ad service will be more sophisticated, enabling better targeted campaigns with better market intelligence. However. Microsoft knows that the key to getting advertising customers is the search engine that consumers use and Google is currently by far the most popular choice. {moscomment}

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