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MSN has added a second pillar to its new search division and a new threat to rivals Google and Yahoo with today’s introduction of its own paid-advertising program, MSN Paid Search Solution.

Contextual, keyword based paid-advertising is the largest revenue generator for both Google and Yahoo. This morning Goldman Sachs greeted MSN’s entry into the field, which is projected to be worth over $5Billion in the next three years, with an “outperform” rating for Microsoft.
Microsoft feels this is important to them. In an interview with John Markoff in today’s New York Times (reg. required), Microsoft CEO Steve Ballmer said, “…having an independent advertising system is strategically vital.”

MSN is not rolling this feature out in North America just yet. It still enjoys a profitable relationship with Yahoo’s Overture, which currently provides contextually driven advertising support for the MSN search engine, a deal that doesn’t expire until June 2006. MSN will be testing its new paid-advertising program in France and Singapore over the next six months.

Microsoft is touting its massive user information database (and its willingness to allow marketers to tap into it) as a competitive advantage. Being the dominant technology firm for almost two decades has allowed Microsoft to accumulate a tremendous amount of personalized data about its users such as age, income, gender, and product interests. It also knows a lot about regional and national demographics.

If allowed to tailor advertising based on a wider range of personalization options, marketers have the ability to better profile groups of recipients. A simple example might be sending luxury cruise information to zip-codes known to have higher numbers of retirees and spring-break specials to zip-codes around colleges. The possibilities are mind boggling.