Microsoft's grand plans to provide free software and services over the internet are predicated on generating ad revenue via adCenter (still in beta) to catch up with Google and Yahoo by offering what they don't - ads targeted by gender, age, ZIP code, time of ad delivery and so on - writes CNET. Microsoft is betting on personalization as the way to boost its online ad sales and outflank its rivals by combining the context of what is being read or searched for, with demographic details on who is doing the searching.

For now, adCenter is limited. "Today, it's keyword," said Joanne Bradford, Microsoft's chief media revenue officer. "We believe in the future it will be about display, video and all that is advertising."

Eventually, adCenter would serve up display ads for Windows Live and Office Live - then mobile devices and Xboxes.

But the next step is making the ads more palatable to those viewing them. "We don't want people to 'put up' with the ads," Bradford said. The goal is to make the ads so targeted that users view them as relevant to what they're doing.

Yahoo, which supplies most of the keyword-related search ads to MSN (the deal runs through June) would likely be the first competitor to feel the impact of adCenter, the goal for the current trial of which is to generate up to a quarter of MSN search results - and it's nearly there, according to Bradford.