Microsoft: we'll keep 'chipping away' at Google

"There's certainly no 'killer app' which will mean we'll have 30 per cent share in search overnight, but it's always been Microsoft's view that you can be in the long game if the game's worth being in in the first place, and we think search most certainly is," Mr Dobson said.

"Ultimately we don't want to be a 'Me too!' product that is simply compared with Google. We want to offer next-generation search. We think we're at the beginning of the journey with search, rather than the end."

At present Microsoft, which is in the process of a $41 billion takover bid for Yahoo!, the struggling internet portal, handles only 4.2 per cent of the search queries conducted in the UK - compared with Google's 79 per cent. Search is seen as a key plank of its overall 'online services' strategy, however, as an increasing proportion of companies' advertising budgets is spent online.

Steve Ballmer, Microsoft's chief executive, has said he would like online advertising to be a $10 billion business for Microsoft - but has not specified by when. In the last quarter, online services brought in about $834 million in revenue for the company - approximately 6 per cent of overall earnings.

Mr Dobson said Microsoft was now in a good position to deliver an 'end-to-end' advertising solution, which incorporated not just search advertising - the paid-for links that appear alongside search results, and banner adverts - those that appear at the top of the page, but also 'bidded display' adverts.

The latter, which are similar to banner ads in that they are usually graphical or interactive in nature, sit on other sections of a website and are auctioned off to advertisers.

As a result of the $6 billion acqusition of aQuantive, the online advertising platform, last year, Mr Dobson said, Microsoft now knew much more about the internet population at large. Users' registration data have provided details of age and gender, as well as records of the sites that they have visited.

That meant it could help advertisers target customers in ways that were not possible with older methods. "If you're an advertiser, you need to get away from thinking 'I want to sell a car so I better go to the car channel' and start thinking 'How do I find a 16-24-year-old male?'"

Display adverts would gradually come to account for a greater proportion of the overall online advertising spend, he said, as companies came to realise the value of having their brand appear on a site and weren't solely focused on getting users to click on an advert, he said. The so-called 'pay per click' approach to advertising has largely been driven by search advertising.

At present, search advertising, in which Google is the runaway leader, accounts for about half of the overall online advertising spend.

The new Microsoft Live Search platform goes live globally tomorrow.