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Sources: Google developing ad service for e-mail

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SAN FRANCISCO, California (Reuters) -- Google Inc., which dominates the market for Web search, is developing a service that could dramatically extend the reach of its lucrative keyword-based advertising by linking such ads to e-mail, people familiar with the matter said on Friday.

Privately held Google, which is expected to go public later this year, faces rising competition in its core search business from e-mail providers including Yahoo Inc. and MSN, Microsoft Corp.'s Internet unit.

Adding an e-mail service would provide a potential boost to Google as its technology lead in the search market seems destined to narrow and it prepares to answer to growth-hungry shareholders, analysts said.

The Mountain View, California, company, which has recently made several e-mail related acquisitions, is working on a way to serve advertising to an e-mail at the moment it is opened, people close to the company said.

"I'm sure Google is getting more and more concerned about locking in users. It wouldn't surprise me if they did something very sophisticated with e-mail," said Danny Sullivan, editor of, who tracks the industry.

By moving into e-mail -- the Web's most-used program -- Google would open up a huge new market for its lucrative "sponsored links" advertising business that delivers ads tied to keywords in Web searches or on content pages, analysts said.

Offering its own branded e-mail -- whether for free or with enhanced services like spam filtering -- would also enable Google to tie users more closely to its search site and to steal customers from rivals, they said.

In an e-mail response to questions from Reuters, spokesman David Krane said, "Google has a number of projects in the works to test monetization in various scenarios.

"In fact, Google's AdSense contextual ads are already used in a number of e-mail newsletters," he said.

Going portal?

Google has for years said it would not turn its site into a full-service Internet portal like Yahoo or MSN. However, since it opened in 1998, Google has added portal-style discussion groups and is testing a comparison shopping site called Froogle, as well as a news site.

Google late last year purchased rival Sprinks, which had technology to deliver ads to e-mail as the messages were opened. Such real-time ad serving is important because it keeps ads fresh and insures that Google will not be giving away free ads or delivering ads nobody will see, industry participants said.

Kanoodle, a small privately held search company, in the coming weeks will roll out its own e-mail advertising product as part of its deal with CBS, said Lance Podell, Kanoodle's president of search and content.

Under that deal, "sponsored link" ads will be served to MarketWatch's opt-in subscriber e-mails, including newsletters.

Experience with sponsored links

Google already knows how to deliver its sponsored link ads -- which are in the form of Web links and appear on the perimeter of Web pages -- to e-mail newsletters and content sites.

Furthermore, Google last year purchased an e-mail management software maker and in 2001 registered the domain name

Some in Silicon Valley also believe Google could be preparing to launch free e-mail to compete with offerings from Yahoo and MSN's Hotmail.

"If they were to go the e-mail route they'd have to provide an offering that competes with free [e-mail]. Anti-spam is one form of strong differentiation," said Jim Pitkow, chief executive of Moreover Technologies, whose personalized search company Outride was acquired by Google in 2001.

Copyright 2004 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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