According to sources familiar with testing, America Online is developing its own desktop search technology that will initially be added to the AOL Browser beta as early as the end of this week.

AOL's entry into the space pits it directly against rival Microsoft, which has designs for a desktop search engine of its own.

AOL Desktop Search is one of many value added features shoring up America Online's upcoming alternative Web browser, currently code-named AOL Browser. AOL Browser is a standalone application based upon Internet Explorer and is independent from AOL's client software.

Although AOL Browser shares the same underlying engine as Microsoft's Internet Explorer, many features more commonly found in AOL's Netscape brand can be found in the release. These additions include tabbed browsing, a pop up blocker, and toolbar buttons that produce thumbnails of Web pages when users hover over them.

AOL Browser is also the lynchpin of an emerging strategy to increase the utility of AOL.com, which has coincidentally undergone a recent makeover.

AOL Desktop Search is an integrated feature that will allow users to search for a plethora of files including: documents in Microsoft Word, Excel, and PowerPoint, as well as PDF, HTML, WordPerfect, rich text and plain text files. In addition, users can scour through Web pages they have previously seen in Internet Explorer, AOL Instant Messenger (AIM) chat logs, locally stored newsgroups and Web logs, as well as digital media and pictures.

The software's next iteration -- scheduled to be unveiled sometime in 2005 -- extends existing newsgroup and blog search functionality to the Web. Other additions that are in store for members include searches for e-mail sent or received via AOL Mail and the ability to search AOL host content and content saved on AOL. For non members, integration into Microsoft Outlook and Outlook Express will be offered.

Commenting on AOL's intentions to build a desktop search utility, Jupiter Research senior analyst Joe Wilcox told BetaNews, "Desktop search is heating up, particularly as Google and MSN plan to expand into that area. Microsoft isn't expected to improve Windows search capabilities for another two years, when Longhorn ships."

"But AOL customers, which increasingly interact with the vendor's digital content services, need better search before then. AOL search tied to its existing service and extended to the Windows desktop would be an enticing utility," said Wilcox.

As Longhorn development continues to encounter delays, Microsoft has demoed a prototype desktop search technology that was integrated into the MSN Toolbar add-on for Internet Explorer, while Microsoft's MSN business unit has publicly unveiled a Web log search engine dubbed blogbot. The software giant promises to cycle its resources toward developing search technologies on an "immense scale."

Departing from its longstanding "member's only" business strategy, AOL has opened up to outsiders. Most recently, the company has offered subscribers open e-mail access to third party clients, a separate dialer to connect to the Web, and a beta of its next generation FanFare client. FanFare delivers on AOL's Open Client Platform initiative known as "Copland," and is an alternative means of accessing communications and digital content for broadband users.

AOL's latest contribution to non-members will be a free public preview of AOL Browser, which will include AOL Desktop Search, according to the company.