NEW YORK (Reuters) - The advertising industry lost a potential balancing influence in the Web search market when deal talks between Microsoft (NASDAQ: MSFT - news) <MSFT.O> and Yahoo (NASDAQ: YHOO - news) <YHOO.O> broke down, the chief of ad services group WPP <WPP.L> said on Friday.

"It was a shame ... that those negotiations failed. Maybe they'll come back again," WPP CEO Martin Sorrell said in an interview with cable news network CNBC. "To have a balanced marketplace in the online search (market) I think is important."

Microsoft raised its bid for Yahoo to $47.5 billion (24.4 billion pounds) last week, seeking to combine their online advertising businesses and create a stronger rival to Web search leader Google <GOOG.O>. The software maker withdrew its bid on Saturday after Yahoo held out for a higher price.

Yahoo has also pursued a deal to outsource some of its search listings to Google (NASDAQ: GOOG - news) , a move analysts say would improve its performance in the near term but runs the risk of regulatory scrutiny.

Sorrell said a partnership between Google and its nearest rival was not good news for the advertising industry either, as it would further concentrate the search market.

"What we're looking for on behalf of our clients is more balance," he said.

(Reporting by Michele Gershberg; editing by John Wallace)