Locked in competition with Google and Yahoo for online ascendancy, Microsoft is scheduled to introduce its own online ad system - intended to transcend those of its rivals by allowing marketers to target contextual ads based on users' sex, age or location - reports the New York Times.

As Google expands the scope of its online offerings with software and internet services on the strength of its core search and search advertising business, Microsoft's MSN is being positioned to meet that challenge, writes the Times; it cites Microsoft's recent reorganization as indicating that the company now sees its future online, with its own targeted ad system supporting that move.

Yusuf Mehdi, a Microsoft vice-president, told the Times that the ad system would attract advertisers and ultimately make more money: "we think we will offer advertisers better value because of the superior information we have about our audience."

Microsoft knows about the characteristics of many of its users because they provided such information when registering for Microsoft services such as Hotmail and Passport.

"They definitely have a market because they have the traffic," Search Engine Watch editor Danny Sullivan is quoted as saying. "Search marketers can't seem to get enough traffic. I don't know anyone who is not going to try MSN."