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Stefanie Olsen

Staff Writer, CNET

In a step to keep pace with chief rival Google, Yahoo plans to start testing a downloadable desktop search application in early January.

The Sunnyvale, Calif.-based Web portal said Thursday that it will introduce free software in partnership with X1 Technologies that helps consumers search the contents of their hard drive, including e-mail, Word documents, PDF (Portable Document Format) files, music and photos. The Yahoo-branded application, available in early January, will let people search their PCs as well as the Web via Yahoo Search, but future iterations will include navigation for Yahoo’s instant messenger archives, address book and free e-mail service.

“Now desktop search is really about people’s hard drive,” Jeff Weiner, Yahoo’s vice president of search and marketplace, said in an interview. In the future it will be “more about searching your essential information no matter where it is.”

Financial terms of the partnership between X1 and Yahoo were not disclosed. X1, based in Pasadena, Calif., was founded by Idealab CEO Bill Gross, who also created Yahoo commercial-search subsidiary Overture Services.

Desktop search is the latest frontier of development by major search providers, Web portals and software makers. Navigating desktop files can be cumbersome or clunky with current operating system “search and find” features, and all the companies believe they can improve people’s ability to organize or find massive amounts of personal data on the PC. For search companies such as Yahoo and Google, the desktop could also eventually be a new venue for delivering contextual or personalized advertising.

In October, No. 1 search site Google was the first out of the gate with free software to mine e-mail, instant messages, text files and the Internet from a Web browser interface. Microsoft also has said it plans to begin testing desktop search software by the end of the year in the United States. And Ask Jeeves is set to introduce on Wednesday its desktop technology, which will specialize in finding multimedia files.

Yahoo plans to stand out from the pack by cinching its portal assets–free e-mail, calendars, photos, music, instant chat and so on–with search. The company does not plan to place ads within its beta desktop search tool, but Yahoo Web searches from the tool will produce sponsored ads.

In a move illustrative of the industry’s competitiveness, rivals were quick to chime in about their coming products. Microsoft, for example, reiterated that it plans to introduce software by the end of the year.

“Our timeline is driven by the quality of the service–we will launch MSN desktop search when we feel that the service has met the quality bar our consumers expect and deserve,” Justin Osmer, MSN product manager, said in an e-mail statement.

“It is our goal at MSN to deliver a search solution that helps people find the precise information they need quickly and easily no matter where it resides,” Osmer added.