Microsoft has launched an attack on the online video-sharing market in an effort to emulate the phenomenal success of market leader YouTube.

The world’s largest software developer yesterday unveiled Soapbox, a site that will allow users to share videos by uploading them online.

It will vie with competitors including Google, Yahoo and Time Warner’s AOL in the battle to glean advertising dollars from content largely created by amateur film makers.

According to industry figures, as many as 200 start-up companies are canvassing for funding to enter the fray, spurred by the success of YouTube, which now downloads more than 100 million videos a day.

Initially offered to a limited number of invited American users during a test phase, Microsoft said Soapbox will go fully live as a part of its MSN portal business within six months. The service will eventually be linked to Microsoft’s new Windows Live platform, a web-based suite of online services for which the company has earmarked some $2 billion in investment.

Technicians who worked on Soapbox under the codename "Warhol" claim it will be more "bandwidth efficient" than its rivals, making it cheaper to run and faster to use. YouTube, which has received VC funding of around $11.5 million, is thought to be spending around $1 million a month on bandwidth capacity to deliver downloads.

Microsoft is also plugging the "Soapbox community", an online set of tools that allow users to discuss videos. The service will also be closely linked with Microsoft's Live Spaces blogging site as the group makes an effort to catch up other sites that have stolen a march in the social networking phenomena.

The number of YouTube visitors has nearly tripled since March to hit 34 million unique visitors a day in August, according to NetRatings, the market researcher.

In contrast traffic at MSN Video, Microsoft's current online video service which offers content from 45 professional content partners, remained virtually flat at less than 12 million users. However, YouTube’s traffic is dwarfed by the 465 million unique users Microsoft claims use its broader MSN portal in a month.

YouTube’s power to generate revenues is unproven but the company has signed a series of deals aimed at exposing its army of users to advertising. Most recently, Warner Music, the record company behind Madonna, this week agreed to licence its library of music videos to the site in exchange for sharing the advertising revenue generated from its content.

Relationships with other parts of the music industry are less cosy, with Universal Music claiming YouTube has been slow in dealing with copyright infringement and threatening to sue.

Soapbox will also make use of Microsoft technology included in both Sony’s Blu-ray and Toshiba’s HD-DVD competing next generation DVD formats. There could also be future links with Zune, the media player Microsoft unveiled earlier this week that will take on Apple's iPod and will allow users to share content – initially restricted to music – wirelessly between devices.

Alongside Soapbox, Microsoft also plans to plough back into the traditional online media by offering more professional content. In a challenge to traditional broadcasters such as the BBC and ITV, it is also exploring ways to move viewers away from short internet clips to longer-format television-style online programmes.

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