How bazaar: Microsoft poised to launch AppStore-style service.

Seeking to regain mobile ground lost to iPhone, Android and BlackBerry, Microsoft is set to announce an iTunes AppStore-style “online bazaar” next week.

The “bazaar” – as one insider labels it for The Wall Street Journal – will let owners of Windows Mobile devices pick and mix from a range of free and paid software downloads for their phones.

The new service will be unveilled at the World Mobile Congress in Barcelona from February 16.

The iPhone’s ever-expanding market share is often tied to the wild-fire success of AppStore, whose free-for-all download model is a stark contrast to the locked-down model telcos and traditional phone makers have previously taken with software. Nokia (with brand-neutral Ovi) and RIM (with its putative BlackBerry AppCenter) have already followed suit. Now comes Microsoft.

Microsoft chief executive Steve Ballmer will be hoping the “bazaar” helps to jazz up the image of the Windows Mobile OS, which so far has focussed strongly on “work” phones and connectivity with office email and networks. iPhone, by contrast, has got a foot in the office door against Microsoft (and RIM) by being seen as both a “play” and a “work” phone.

While there’s little consensus on what defines a “smartphone,” by IDC’s estimate Windows Mobile-based devices have seen their share of the total “converged device” market increase from 11 to 13.3% over the past year year.

Apple’s iPhone, by contrast, leapt from 3% to 9% market share (in New Zealand, the surge resulted in record smartphone sales, and also hit a between-models BlackBerry).

RIM’s BlackBerry also enjoyed faster growth, jumping from 9.9% share to hold 15.5% of the market (the major loser was the Nokia-owned Symbian OS, falling from 63% to 48%. Symbian runs many of the smart phone models made by Nokia, Motorola and other more traditional phone makers. Motorola recently pledged to move most of its high-end models to Windows Mobile or Google Andorid).