According to reports, Microsoft is ready to start expanding its AdCenter engine to allow at least some publishers to include contextual advertising from Microsoft on their site.

Microsoft is reportedly engaged in a pilot program that allows smaller publishers to use contextual advertising from Microsoft, putting it potentially in competition with Google’s AdSense and Yahoo’s publisher network.

In a statement provided to CNET News on Thursday, Microsoft confirmed the trial.

“Microsoft’s self-serve advertising offering for publishers is still under development and is currently in a private pilot phase, being tested by select publishers who met the participation requirements,” Microsoft said. “The private pilot phase began earlier this year.”

Microsoft pointed publishers interested in the pilot to sign up for the trial.

“It’s our intention to continue to expand our high quality network and relevant audience gradually and intelligently over time for our advertisers,” Microsoft said. “We will evaluate customer interest and product performance as we move through the private pilot, but we have no specific launch plans to announce at this time.”

Microsoft has already struck deals with larger publishers to use its contextual advertising, most recently with Rodale.

This is certainly good news in light of the rumor that Google is about to bounced a substantial number of domains from their program.

More of a reason to root for Microsoft to buy Yahoo rather to let Yahoo outsource their PPC to Google’