Microsoft has opened a new front in the battle with Google, the search engine group, in the increasingly ferocious struggle for control of the online services market.

The software giant has said that users of its popular e-mail and instant messaging tools on mobile phones will display advertisements for the first time. Those using Windows Live on phones will also see ads.

Mobile telephony is regarded as an increasingly important component of the digital advertising market as new devices, such as Apple's iPhone, improve the use of web-based services.

While it represents a small part of spending on digital advertising, it has significant potential because of the ability for advertising to be coupled with location using GPS.

In theory, mobile users could be targeted with an advertisement as they come into the vicinity of a particular vendor.

According to a M:Metrics, which tracks use of the mobile internet, 62 per cent of search queries by UK mobiles are performed by Google, compared with 7 per cent performed by MIcrosoft's Windows Live search.

Brian Arbogast, corporate vice-president of mobile services at Microsoft, said: "Eventually we'll get to a point where there's enough people searching for local services on the mobile internet to make it worthwhile for a small business to purchase ads on mobiles."

Microsoft bought ScreenTonic, an advertising platform, which was an early leader in delivering advertisements to mobile phones, for an undisclosed sum last year.

Microsoft, whose share of the search market has slipped as Google's has grown, is trying to recover the initiative in the online advertising market, which is expected to double in size to $80 billion by 2010.

Google has built a $20 billion (£10.2 billion)-a-year business from online advertising, mostly from sponsored links next to search results. It began testing a mobile version of its search-based advertising service in 2006.

Mobile advertising spending in Western Europe is expected to rise from $1 billion in 2007 to $1.5 billion this year, according to eMarketer, the research firm.

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