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Is Microsoft's adCenter Too Little, Too Late?

WSJ reported that Microsoft Corp. showed off the auction system it hopes to use to tap into the gusher of advertising dollars flowing online. The system, called adCenter, was introduced at a conference the software maker held for hundreds of advertisers in Seattle.

It's Microsoft's most ambitious effort yet to catch Google Inc., whose own system has been key to that company's runaway revenue growth. The auction services let advertisers bid against each other online to have their ads displayed alongside search results. Each time an Internet user searches for specific keywords, such as "digital camera," the system displays a related ad for, say, a camera retailer. Advertisers pay if a consumer clicks on the ad, with prices per click averaging around 50 cents.

For Microsoft, adCenter is a critical part of a fundamental shift in strategy as the company tries to combine advertising with its traditional software business. AdCenter is "the next big revenue engine for the company," says Tarek Najm, general manager of adCenter and Microsoft's lead engineer on the project.

But it's also a huge bet that demands a new set of skills that Microsoft is learning on the fly. First among Microsoft's challenges: winning support among advertisers already devoted to Google's system. Meanwhile, the competition is heating up: This month Yahoo Inc. will unveil long-awaited improvements to its auction system, and Google continues to improve and expand its approach.

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