Yahoo! expects to lose its search-advertising deal with MSN, company executives said last week, as Microsoft looks to tap into the lucrative search market.



Ted Meisel, a Yahoo! svp and head of its Overture Services division, told Adweek that MSN's commitment to search probably means that it will build its own search-ad platform. Overture, Yahoo!'s search-advertising unit, has a paid listings distribution deal with MSN through June 2006. MSN has declined to discuss any plans in paid search.

"The right thing for us to do, as a business, is assume one day that MSN will develop its own ad network," Meisel said. "I don't know when that day is or if it will come. Until then, we're going to continue to serve them well."

Meisel was echoing comments made by Yahoo! CEO Terry Semel a day earlier during a Bear Sterns conference in Florida, acknowledging that MSN would likely end up as a competitor to search-advertising networks offered by Yahoo! and Google. "I welcome that," he said. "It's good to have good competition." Yahoo!'s search distribution partners include CNN.com, InfoSpace and Excite.

MSN replaced Yahoo! with its own search engine in late January, backing the launch with an estimated $150 million advertising campaign. The company has not commented on its plans for launching an ad program, although it began recruiting paid-search specialists in December 2004.