Ad blockers are nothing new, and privacy settings on Internet Explorer and Firefox have long allowed users to opt out of some forms of advertising, but a beta version of Microsoft’s new IE8 is raising some eyebrows in the interactive marketing community, according to an Associated Press report.

Users of the new IE8 who select the InPrivateBrowsing mode will be able to surf the web without sharing key data points with advertisers such as the previous sites they’ve visited. The privacy mode also allows users to view some websites without ads.

Firefox, which owns a significantly smaller segment of the browser market than Microsoft, launched an ad-blocking product last fall that stirred up a great deal of controversy, though it ultimately proved to be a non-issue despite widespread adoption by Firefox users. Yet, Microsoft’s decision to enhance IE’s ad blocking capabilities seems to be a rather curious choice given the company’s insistence on becoming an advertising giant.

But according to JJ Richards, a general manager in Microsoft’s advertising division, the decision will help to highlight the value exchange between free content and advertising that is vital to the future of the internet.

However, the new browser is treading on dangerous waters if it sees widespread adoption because it will block the ability of ad servers to calculate how many times an ad is viewed. According to Mike Zaneis, vice president of public policy for the Internet Advertising Bureau, the new browser could have drastic implications for the internet advertising marketplace. But Zaneis said he and the IAB would reserve judgment until Microsoft releases the final version of IE8.

There is no set date for the release of IE8, however the product is available for public beta testing.

Microsoft Senior Vice President Satya Nadella announced at the company’s financial analyst meeting that their partnership with Facebook has been extended to include search.

The existing partnership has Microsoft serving up banner and sponsored ads on the popular social network. Last year, Microsoft paid $240 million to own a 1.6% stake in Facebook, a private company.

Microsoft expects Facebook members to see the integrated Live Search, including search ads, by the end of the 2008.

Earlier today, Facebook announced a new initiative, opening up its platform to aggregate feeds from other sites, including local search site Citysearch and other social networks such as Digg and Twitter.

In March, Microsoft announced its alternative to Google’s OpenSocial, a data portability partnership across 5 social networks: Facebook, Bebo, Hi5, Tagged and LinkedIn.

Meanwhile, Microsoft has announced a reorganization which will split the Platforms and Services Division into two new divisions: Windows/Windows Live and Online Services.

AdGooroo has released second quarter search advertising results, and Google’s client base is down 6.4% from the previous quarter. Google also declined 8.5% year-over-year.

Things were far worse for MSN. Their client base dropped a whopping 20% from Q1. The decline contributed to a 6.7% drop year-over-year. The decrease is not really a surprese since Microsoft has essentially admitted how bad their search is in their attempt to acquire Yahoo, and their successful acquisitions of FAST and Powerset.

Meanwhile, Yahoo could use some good news right now, and the AdGooroo data delivers. Yahoo saw a slight increase in its advertiser base at 0.03% over last quarter, and up 9.8% over last year.

Here’s a chart with all the data goodness:

AdGooroo also reported data on the number of ads per keyword. Globally, the number of ads per keyword declined across Google, Yahoo, and MSN. When just looking at the U.S., however, Yahoo and Google held steady while Microsoft saw a decline.

More data for the math junkies:

What do you think of these numbers? Let us know in the comments.

Yahoo! is back around the $20 range again today. If Microsoft could find a way to buy them they could quickly gain some search marketshare, but presuming Microsoft builds a memorable search brand they could probably catch up through other acquisitions cheaper.

I think rather than buying another overpriced ad platform a cheaper way to attack Google would be to buy some of the leading editorial brands/sites that dominate Google’s organic rankings. For far less than the $47 billion Microsoft offered for Yahoo! they could buy…

• Expedia (currently valued at $5.2 billion) and have a leading role in the travel market. I think something like 40% of internet commerce is travel.
• Monster.com (currently values at $2.24 billion) and have a leading role in employment and education.
• Bankrate (currently valued at $700 million) and have a leading role in the mortgage and consumer credit markets.
• WebMD (currently valued at $1.64 billion) and have a leading role in the medical market
• IAC (currently valued at $5.38 billion) After IAC spins off many of their other units this price might go cheaper. Google paid $1 billion for 5% of AOL. Microsoft can get 100% of Ask (with more marketshare than AOL) for not a whole lot more, giving them significantly more marketshare than they currently have and an actual brand in the search market. Plus IAC is buying Dictionary.com and some other generic high traffic sites.
• The New York Times (currently valued at $2.25 billion) and have a leading role in the news market. If they wanted to they could buy it out, spin out About.com as a Microsoft owned web property, then set up the NYT as an industry non-profit that monetizes via a longterm ad arrangement with Microsoft.

I think those companies add up to around $17.4 billion. Pay 50% over market value to close the deals and they could have all the above for $26 billion, giving them a leading position in most high value markets and $20 billion left over for marketing, branding, and buying further assets.

Is the above strategy crazy? What would you do if you were Microsoft?

Despite all the controversy over Microsoft using Silverlight to take over the rich internet market from Adobe Flash, the software giant seems to be not even trying. In fact, even most Microsoft web sites are using Flash instead of Silverlight.

A quick check through Microsoft properties reveals that only the Microsoft Home Page and the Microsoft Developer Network use Silverlight; MSN Video, Zune.net and the new WWTelescope all use Flash.

Microsoft even appears to be on par with Adobe when it comes to platforms outside of Windows. Silverlight works on Safari for Mac or PC, as well as on Firefox and other Mozilla-based browsers. Silverlight even seems to work “unofficially” on Opera (as long you pretend you’re not running Opera).

Silverlight isn’t supported in Linux, but as an avid Ubuntu fan, I can tell you that Flash does not work well in Linux either. A host of open-source alternatives, like Gnash, have mostly solved that issue. Former Adobe CEO Bruce Chizen’s fears of Microsoft favoring Windows seem incredibly unfounded.

But if Microsoft is playing nice for a change, why are they afraid of promoting their product — and why are they afraid of even using it? Maybe “nice” is too novel a strategy for Redmond. It may take some getting used to — for everyone.