It will launch iQuest on 5 April to offer advertisers a service that will help them gain prominence in paid-for searches, which rank companies when internet users enter relevant keywords.
The division, which will sit within PHD's interactive division, PHDiQ, will be run by Andy Atalla. He moves to the agency as its head of search from the search engine Ask Jeeves, where he was a strategic planner.
Although the main function of iQuest will be to provide visibility for businesses when internet users are searching areas of interest, it will also work to help agency planners understand existing perceptions of issues, brands and people.
Howard Nead, the managing director of PHDiQ, said: "My belief is that this is a specialist area and we felt it was time to have our own in-house specialist to run campaigns for us. An important part of that role will be to ensure that we continue to understand fully the relationship between offline and online media and search performance."
Nead pointed to research that indicated search is the fastest-growing area within online advertising, accounting for 30 per cent of online adspend, as a sign that the area is of increased interest to advertisers.
He said that he hoped iQuest would develop into a significant part of the PHDiQ offering. Some 25 per cent of PHD's online billings come from the search area and it will hire more staff for iQuest as it grows.