Yahoo is expected to announce a new service Tuesday that uses free software to divert surfers from Microsoft's Web properties by changing the preferences in Internet Explorer.
Parts of the service quietly launched Monday in conjunction with an upgrade to Yahoo's instant messaging software. When downloading the update, consumers were given the option to receive the new IM client on its own or as part of a package called "Yahoo Experience."
Among other things, people electing the second option were directed to Yahoo's search page rather than to Microsoft's MSN search service when they typed a word or phrase into the browser command line.
"Yahoo Experience is an early test version of something we're launching (Tuesday)," said a Yahoo representative who declined to comment further.
A Microsoft representative also declined to comment on the feature.
Yahoo's move comes as companies are increasingly usurping Web browser preferences such as home page settings, often without the explicit consent of consumers. Free software downloads are a common tool in the battle, giving programmers the ability to quietly change browser options.
Web surfers who elected to download Yahoo Experience on Monday received an upgraded version of Yahoo Companion, a previously released product that accesses Yahoo services such as search, Internet e-mail and news by adding a second toolbar below the standard menu offered on Explorer.
Electing to install Yahoo Experience also changed the settings in Explorer, harnessing the command bar as a Yahoo search tool. For example, a person typing the word travel would be taken to a Yahoo search page. Without Yahoo Experience, the person would be directed to MSN's search page.
The changes to Explorer appear to be a direct challenge to Microsoft's control over the command bar--power it has wielded to push its own MSN search service past rivals, including Yahoo.
Microsoft offers a service through partner RealNames--modeled on AOL Time Warner's keyword service--that allows common words to link directly to Web pages without requiring surfers to type in more complex Internet addresses. RealNames has struggled to gain acceptance, but it recently signed a deal with domain name registrar VeriSign that could boost its presence.
Microsoft, meanwhile, has become more aggressive in capitalizing on its ownership of the Web browser market. Explorer is used by more than 85 percent of all Web surfers, giving the software giant an enormous advantage in promoting its own services.
Last month, for example, the company quietly tweaked Explorer to redirect surfers who mistype Internet addresses, such as "www.microsoft.con," to its MSN search service, rather than to a standard 404 "page not found" error message.
The switch, billed as a service enhancement by Microsoft, helped the company claim a No. 1 search ranking last month, based on custom research from Jupiter Media Metrix. Microsoft said MSN Search had more than 32 million unique users in the United States, compared with Yahoo Search's 29 million users.
Yahoo immediately refuted the claim, saying the numbers came from a custom report the software giant asked a third-party research firm to create. Yahoo added that many MSN Search queries are "involuntary," referring to Microsoft's recent changes in the browser.
The new Yahoo feature raises questions about how far the struggling Web portal is prepared to go to draw its already loyal customers even closer. Although Yahoo has signed up millions of members who turn to its site daily, it has had difficulty turning them into paying customers--a feat it desperately needs to accomplish successfully to shake off growing doubts about its advertising-dependent business.
The company has undergone a wave of changes in the past 12 months, including naming new CEO Terry Semel, who assumed the helm with a mandate to rekindle Yahoo's sagging fortunes. Semel has focused on figuring out ways to generate more revenue from Yahoo's millions of visitors and to expand the company's roster of corporate customers.
The company reported a 44 percent decline in revenue in the third quarter compared with last year, falling to $166.1 million, and said it may lay off additional employees as the company seeks to refocus its business. More details of the company's strategy are expected next month at an analyst conference Yahoo is hosting at its headquarters in Sunnyvale, Calif.