It seems that the internet advertising space is starting to heat up with Yahoo unveiling the latest addition to its three-cornered battle with Google and Microsoft.

Yahoo's new ad system, with one of those enigmatic code names - Project Panama - promises (like all the others) to more accurately target customers and, for good measure, throws cost of customer acquisition into the equation. So we have Yahoo this week promising advertisers that its system will help them work out how much it costs them to get new customers, last week Microsoft promising that its new AdCentre system has geographical and time targeting capabilities, with both aiming to knock off the market leader Google, whose Adsense system has neither of these features.

Depending on whose figures you believe, Google currently has 49% market share of search engine advertising, easily greater than the combined 22% of Yahoo and 11% of Microsoft. While Yahoo is the second runner, however, Google recognises that the greater threat comes from Microsoft, which has a powerful Ace up its sleeve called Internet Explorer, which has 85% web browser market share.

The new Internet Explorer browser, IE 7, has similar functionality to the fast rising Firefox from Mozilla, which has 11% share. Google pays Mozilla to have its search box on the browser tool bar. Microsoft plans to put its own search box as the default on the tool bar of IE 7. Google is not at all happy about this and has lodged complaints with the European Commission (EC) and Department of Justice (DOJ) in the US, claiming Microsoft's actions are anti-competitive given its near monopoly in the browser and PC operating system space.

The fact that Google has taken this action shows that the marketing might and market presence of Microsoft have rattled the search engine leader's cage. However, whether Google has an Ace of its own up its sleeve with regards to its own search engine offering remains to be seen. {moscomment}