Microsoft has applied, and been accepted, as an Internet domain name registrar.

The company was added to the list of accredited domain name registrars by the Internet Corporation for Assigned Names and Numbers (ICANN) last week, allowing it to purchase domain name directly and for trade price.

However, that is unlikely to be the real reason for the software giant's effort. Microsoft said in a statement that the accreditation "will be helpful and educational for us as policies evolve and we introduce new and improved Internet-based services to our customers... Becoming an ICANN-accredited registrar is just one of many ways we can improve our customers' online and search experience," a statement read.

The fact is that becoming a domain registrar brings a number of advantages, including access to rapidly updated databases over domain ownership, that Internet companies are increasingly seeing as providing a competitive advantage. Google for example became a registrar so it could quickly determine when domain changed hands and then adjust their search ranking accordingly.

Microsoft's decision is probably related to its Office Live product, which is expected to emerge from its beta testing period later this month, according to Rich Miller, an analyst with Internet research firm Netcraft. Microsoft offers free domain name registration to Office Live users and to date the company has been using Melbourne IT for this service. By becoming a registrar in its own right, Microsoft could cut costs, Miller said.

Recently AOL has started attracting business by offering free domain names, calculating that the $6 cost will be more than pay back over time through customer loyalty.

Meanwhile, Microsoft can now buy .com, .net, .org, .biz, .info, .name and .pro top-level domains at cost price.

Original reporting by IDG News Service