Microsoft Thursday will roll out enhancements to MSN Search that collectively represent the most significant upgrade in that search engine's history, the company said in a statement late Wednesday.Microsoft\u00a0Thursday will roll out enhancements to MSN Search that collectively represent the most significant upgrade in that search engine's history, the company said in a statement late Wednesday.The improvements include a revamped layout to give the Web site a cleaner, simpler look and to more clearly distinguish between results generated organically by the search engine and results which appear because they are paid-for ads, often called sponsored results.Specifically, Microsoft has decided to reduce the number of sponsored results it serves up, and to display them in shaded boxes with a clear label that differentiates them from the search engine's results, which in turn will be more prominently displayed now on the search results page. In beta tests, this new design increased significantly the amount of time users spent at MSN Search and the number of queries they ran, compared with the old design, Microsoft said.Moreover, the search box in the home page will feature a pull-down menu to let users choose whether they want to query MSN Search's Web index, its news sources collection, a selection of the Encarta encyclopedia contents or stock quotes, among other options. MSN Search's performance has also been improved, as has the relevance of its query results.The stock quotes, for example, will come from MSN Money, while the Encarta content will come from a selection of the Encarta Reference Library 2004, which includes the Encarta Encyclopedia Deluxe 2004 and the Encarta World English Dictionary, Microsoft said."I think the primary enhancement you'll find is in its interface, in the look and feel: a cleaner site that allows for a friendlier user experience," said Allen Weiner, a Gartner analyst. "You have to look at this as a multi-step process they'll go through in terms of what their plans for search. Creating a friendlier user experience is a great first step."Microsoft is likely to follow up this set of enhancements by beefing up MSN Search with strong proprietary content, such as music files and street atlases, of which a first step is the tying of the Encarta content with MSN Search, Weiner said. Another route Microsoft is likely to take as it continues to enhance MSN Search is to build links with its desktop products, so that search information and features can be placed in, for example, Outlook e-mail messages, PowerPoint presentations and Excel spreadsheets, he said.As part of the MSN Search revamping, Microsoft has also decided to put on hold, pending further evaluation, its paid inclusion program, in which Web site owners pay to have Microsoft include their sites in the MSN Search index. Search engines have been criticized for engaging in this practice, which detractors say artificially populates an index and thus skews the relevance of query results. Popular search engine Ask Jeeves last week announced it was cancelling its remaining paid inclusion program.While describing MSN Search's upgrade as the biggest since it was launched in 1998, Microsoft also said that the enhancements being rolled out Thursday are "initial steps" in a massive company push into the search arena whose goal is to eventually deliver a search engine that provides "direct answers" to queries, Microsoft said in the statement. Thursday's upgrade is part of a $100 million investment by Microsoft to develop its search engine technology.Too often users don't find the information they're looking for when using a search engine, and when they do, it takes too long, because the process is based on plowing through long lists of Web site links, Microsoft said.Along these lines, beginning on Thursday, Microsoft will also let users test drive a next-generation search engine it is currently developing, and which it plans to launch "within the next year." A link to that new search engine, which is still in its very early stages, will appear Thursday, a spokeswoman for Microsoft said Wednesday.That next-generation search engine is being designed to solve queries in a more direct and "smart" manner, Microsoft said. The back-end technology that powers MSN Search currently is licensed by the company from Yahoo.Charlene Li, a Forrester Research analyst who had the chance to test this search engine, says Microsoft is on the right track. "It's pretty good. It doesn't have the biggest index, but the search results are decent," Li said.Developing the algorithms needed for a search engine to perform well isn't rocket science, but rather more a matter of working long and hard at it, which Microsoft has been doing, Li said.Microsoft executives have said recently that their vision for the search segment includes the ability to not only search the Web, but also users' PCs and other sources of information.The Internet search market has become very attractive in recent years thanks to search engines' practice of matching ads to individual searches, making the ads highly relevant to the information a user is searching for. For example, a vendor of sporting equipment may pay a search engine to run its ad whenever someone searches for keywords such as "tennis," "football" or "soccer."Advertising tied to keyword searching was the fastest growing and the biggest of all U.S. Internet advertising categories in 2003, according to a report published in April by the Interactive Advertising Bureau and conducted independently by PricewaterhouseCoopers LLP.Keyword search revenue made up 15% of online ad revenue in 2002, and jumped to 35% in 2003. The rest of the 2003 U.S. Internet advertising pie was made up of display advertising (ad banners) with 21% (down from 29% in 2002), classifieds with 17% (up from 15% in 2002) and rich media advertising with 8% (up from 5% in 2002), according to the report. Internet advertising for all of 2003 reached just under $7.3 billion, up nearly 21% from 2002.Google leads in search engine usage both in the U.S. and globally, according to recent statistics from market researcher comScore Networks. About 35% of Internet searches in the U.S. in February 2004 were done using Google. Yahoo came in second place with 30%, and Microsoft's MSN a distant third with 15.4%. Worldwide, Google accounted for 43% of all searches, followed by Yahoo with 31% and Microsoft's MSN with 14.1%, according to comScore.However, the game is far from over and Google doesn't have a stranglehold on the top spot of the Internet search market, because user loyalty in the search engine space is thin, Weiner said."Right now, Google is a very narrow brand," because it is almost exclusively focused on search services and doesn't have a suite of complementary Internet services the way Microsoft and Yahoo do, Weiner said. With its 170 million users of its free, Web-based e-mail service Hotmail and vast dominance in the Web browser space, Microsoft has a lot of muscle to market its search engine, he said.