Microsoft strengthened its alliance with internet navigation firm RealNames Corporation by taking a 20% stake in the group yesterday as a direct challenge to America Online, which offers a similar product.

The deal, one of a string announced by Microsoft, means it can use the RealNames technology to allow web surfers to type keywords into a browser's address field rather than lengthy URL addresses filled with dots and slashes.

Ford, eBay and MP3.com are among the 50,000 clients of RealNames. They pay the US firm to register keywords.

For example, Ford could register "ford explorer" as a keyword and pay RealNames a licence fee or a per-visit fee; users who typed in the keyword would be taken directly to the motor group's website.

The monetary value of Microsoft's investment in RealNames was not disclosed because of mandatory curbs imposed because of the net navigation group's impending flotation, intended to raise a minimum of $80m.

AOL also has a product which uses keywords to direct users to websites of its partners.

Yusuf Mehdi, Microsoft's consumer group director, said of the RealNames technology: "This has the possibility to become the premier way people search on the Internet.

"We think it's going to give AOL a real run for its money with its closed and proprietary system." The technology includes a tracking system for monitoring the effectiveness of online advertisements.

The investment will make Microsoft the largest shareholder in RealNames, alongside Network Solutions, Draper Fisher Jurvetson and idealab! capital partners.

Last year Microsoft struck a two-year licensing and marketing agreement with RealNames to incorporate the RealNames web addressing and navigation service into MSN Search, part of the Microsoft Internet Explorer 5 browser.

Analysts said the RealNames deal might increase Microsoft's internet subscriber base by making its MSN web portal easier to use.