Microsoft has extended its interest in Web-based email services by taking a minority stake in email service provider Commtouch Software.

Commtouch provides an unbranded Web-based email service for third parties to dress up as their own. Its customers, which collectively boast 8.5 million active email boxes, include Excite, Fortune City and now Microsoft.

In a deal valued at $20 million, Microsoft has taken a 4.7 per cent stake in Commtouch. Under a partnership in October, Microsoft already distributes Commtouch's service to select MSN partners and Commtouch distributes MSN Messenger and Microsoft Passport to its customers.

Microsoft is itself one of the world's largest Web-based email providers through its Hotmail service, which has around 50 million members. Commtouch argues that its customers are not competitors of Hotmail because they are focused on the business market, while Hotmail is focused on consumers.