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MSN to shake up search ads

Microsoft's Web portal plans to label its paid-search listings more clearly and to showcase ads sold by its own staff rather than by Yahoo-owned partner Overture.

Microsoft's MSN is planning to label its paid-search listings more clearly, a course long advised by the Federal Trade Commission.

The software giant said on Friday that as of July, its Web portal will better mark out which of its MSN Search results are paid listings, making them more relevant to visitors' search terms.

In addition, MSN Search will showcase text advertisements sold by its own staff rather than promos sold by its third-party partner, Yahoo-owned Overture Services. Overture ads will appear to the right of search results rather than at the top.

That could be a sign that MSN is growing antsy for independence in one the hottest sectors of online advertising, expected to be worth an estimated $4 billion this year. By featuring MSN-sold ads, it could guarantee higher click rates and more ad revenue for itself.

The company is bringing more clarity to its paid search after years of criticism from the FTC and consumer action groups. Two years ago, the FTC began an investigation of several major search providers over the relationships with advertisers, when it comes to search results, which are typically considered unbiased by visitors. It ended the query by calling on them to clearly designate commercial search results with "sponsored ad" labels.

Despite this, MSN maintained its "featured sites" label for text links sold to some advertisers.

On July 1, MSN plans to overhaul the way its search result pages appear. The top three listings, instead of four, will be highlighted with a box, marking them as "sponsored" results. These will be sold by MSN sales staff. MSN will also replace Overture sponsored listings from underneath with one editorial staff-recommended site. Following that will appear natural or algorithmic search listings, provided by Yahoo-owned Inktomi.

Microsoft plans to announce the changes to advertisers next week at its annual ad summit in its Redmond, Wash., headquarters.

The move comes as MSN is jockeying to become the king of Web search, a title held by Google and coveted by Yahoo. MSN is investing millions of dollars in resources to build next-generation search technology to replace that which it licenses from Yahoo. It is also working on a system for pairing text ads with search results, in an effort to replace Overture and keep more of the ad dollars it generates.

Paul Ryan, the former MSN executive in charge of paid-search technology, quietly left the company in February after only four months on the job. MSN is still looking for a replacement.

MSN's coming changes will feature algorithmic search results from partner Inktomi. Inktomi also sells advertisers the ability to have Web sites updated more frequently in its database--a service called paid inclusion. Yahoo recently relaunched this program, to some industry disapproval. Critics say paid inclusion could create bias in search results.

Karen Redetzki, MSN product manager, said MSN Search will continue to offer paid inclusion within Inktomi results. She said the company continues to test the relevancy of its search results and that the latest changes reflect visitors' preferences for more algorithmic search results and less clutter, when it comes to paid listings. Redetzki said the move was not in response to the FTC but rather to consumer demand.

"We've found that people spent more minutes with MSN Search, when we had algorithmic search results above the fold, 100 percent of the time."