Microsoft's MSN division will enhance its search engine in the next couple of weeks by adding a local search index for finding business directory listings. Later, the company will supplement this with MSN Virtual Earth, a free new service that will pinpoint places in maps and satellite images.

Local search is a gaping hole in the MSN search engine. All other major search engine providers, including Google, Yahoo, Ask Jeeves and AOL, have a local search tab on their search websites. As part of its local search service, Google also provides maps and satellite images, offering functionality that is similar to what Microsoft is aiming for with MSN Virtual Earth.

MSN Virtual Earth was demonstrated for the first time today at an event hosted by Microsoft chairman and chief software architect Bill Gates. Microsoft officials said it will become available sometime between 21 June and 22 September.

In addition to complementing MSN's local search index, MSN Virtual Earth will let users overlay maps and satellite photos in order to create hybrid images that combine the best of both mediums.

MSN Virtual Earth will be integrated with users' preferred email application and, with a single click, will place links in email messages to maps and images. Users will also be able to post images to their MSN Spaces Weblog from within the MSN Virtual Earth interface.

Users will be encouraged to provide feedback on business directory listings so that the MSN local search service will be able to give users a sense of what a particular area is like.

MSN Virtual Earth uses technology from MapPoint and from Terra Server, a database of satellite images Microsoft has had for about ten years, the officials say.

MSN Virtual Earth also will let users view aerial images not only straight down but also from an angle, so that they will be able to view, say, buildings from the sides as well as from the top.

Local searching is becoming increasingly popular with users and online advertisers. It lets users find business listings and complementary information for a specific geographical area, while advertisers are able to target their ads only at those who are looking for services and products in their vicinity.