The service, code-named Fremont, has been in internal testing at Microsoft for about a week and a half, Garry Wiseman, MSN product unit manager, told CNET News.com in an interview. He said he could not say when it would be available publicly.
"Basically, it will be a free listing service, with a bunch of twists to make it very unique, such as integration with social networks, in particular integration with MSN Messenger," he said.
Ads relevant to the listing will appear alongside the search results, he added.
Fremont will allow people posting a listing to make it searchable globally on the main MSN search site, as well as on a standalone Web site. People will also be able to specify that it be viewable only by their MSN Messenger buddy list members, in their MSN Spaces network, or in a specific domain name e-mail group, such as e-mails that end in "Microsoft.com," Wiseman said.
Listings are geo-tagged and integrated with MSN's 3-D satellite image-based mapping application Windows Live Local, formerly called Virtual Earth, so they are viewable on a map, he said. Searchers can specify a geographical area to target as well as ask to see only listings from people in their MSN Messenger buddy list.
The concept was born in February "as we looked at the way classifieds were heading online," he said. "It was quite obvious there was a huge market starting to grow there."
A team of six was formed and work began in earnest in April, Wiseman said.
"One of the inspirations for the community aspect was Microsoft's internal classifieds listing service," he said. "The amount of cars sold on that is just phenomenal."
Not to mention, extra concert tickets swapped, baby sitters hired and garage sales announced, Wiseman said. "People have a higher level of trust when dealing with people they know."
News of the Microsoft service comes two weeks after Google's new. Google Base was launched to be a repository for all types of information that people want to expose to others on the Web, like items for sale and recipes. Observers have speculated that Google is preparing to jump into the online classifieds market with the service, a prediction the company has denied.
"We started this before anyone knew about Google Base. Having seen what Google Base is doing, I don't think they were aiming for a classifieds service," Wiseman said. "They don't have a taxonomy of listings like we do. They see it as an open database."
The Microsoft service will compete with newspaper classifieds that have moved online, as well as services like Craigslist.org that target specific cities with a variety of listing types, and possibly even auction Web sites like eBay.
The U.S. online classifieds advertising market is forecast to grow from $2.6 billion this year to $4.1 billion in 2010, according to JupiterResearch.
"People talk about Google Base as a classifieds play, but there is some uncertainty about that," said Greg Sterling, managing editor of The Kelsey Group, who reported on the pending Windows Live classifieds service a week ago in a Search Engine Journal blog. "This (Fremont) is unmistakably a classifieds service," and an "impressive" one at that.
"I think the task at hand is to create a critical mass of users and a marketplace that is really viable and serve ads against that traffic," he added.
Peter M. Zollman, publisher of the Classified Intelligence Report, said classifieds services are a logical extension for the major portals.
"AOL has had classifieds for a long time. Yahoo has had HotJobs and personals and has had relationships in the other two major classified verticals: real estate and automotive," he said. "Classifieds are $100 billion business globally (including listings and ads) and every penny of that marketplace is in play. Most of it still in print...But, even (News Corp.'s) Rupert Murdoch said last week he doesn't know anyone under 30 who uses newspapers for classified ads."
Michael Arrington reported on Fremont on his Techcrunch blog. "I had a chance to see a demo of the product--it's very cool and will definitely shake things up," he wrote in a posting Monday.