Business - Microsoft webbrowser that covers its tracks could hit Google's advertising

Microsoft’s latest internet browser includes a piece of software that allows internet users to hide the audit trail of websites they have visited.
The InPrivate feature on Internet Explorer 8, nicknamed “porn mode”, allows users to conceal the sites they have viewed at the click of a button.
Once the setting is chosen, others using the same computer will not be able to see which sites have been accessed. Other browsers have similar functions, but this one is far more prominent. Although casual users cannot see the previous user’s search history, authorities such as the police will be able to access it if necessary.
The software may be hailed as a victory for privacy campaigners, but it represents a serious threat to Microsoft’s bigger rival, Google. In allowing surfers to access websites but conceal their browsing behaviour, Microsoft prevents internet sites from collecting information about their users — data that is then used to sell targeted advertising.
Marketing companies try to target adverts at internet users whom they believe may be interested in certain goods or services.
Google, Yahoo! and Microsoft are fighting for bigger shares of the world’s internet advertising market, which is estimated to be worth $40 billion a year (£21.8 billion) and is expected to double in value by 2010.
Google, which is the world’s biggest internet company, holds the lion’s share of the online advertising market, leaving Yahoo! and Microsoft to hold the second and third slots.
So lucrative is the internet advertising market that Microsoft tried to buy Yahoo! for $47.5 billion this year solely to compete with Google. Yahoo! rejected Microsoft’s approaches, even though the software company had been willing to pay 72 per cent more than its share price.
Google tried to expand its targeted advertising business when it bought DoubleClick for $3.1 billion this year. The internet company is attempting to increase the proportion of its revenue that is derived from display advertising.
The company has been criticised for the quantity of data it gathers about people who use its services.
David Mitchell, of the information technology agency Ovum, said: “If the hype around privacy gains more credibility, more people will hit the private button. There is a potential threat here to click-through advertising.”
Microsoft’s so-called porn-mode button strikes at the heart of an ongoing row about internet privacy and how much online companies and advertisers know about our behaviour and interests.
At the extreme end of the debate, the online search engine Yahoo! was vilified by human rights campaigners after it disclosed details of its users to the Chinese government. The information led to the arrests of writers and dissidents. One journalist cited in the case was tracked down and jailed for ten years for subversion after Yahoo passed on his e-mail and IP address to officials. Yahoo! had argued that it had no option but to comply with local laws.
The browser became available as a “beta” version last night but will eventually be included with Microsoft’s Windows operating system.
Microsoft and Google failed to return calls last night.