At a San Francisco media event Nov. 1 with reporters and analysts, Microsoft unveiled two new Web services—Windows Live and Office Live. Both offerings will be free to consumers because they will be ad-supported, via Microsoft's adCenter. Until now, the adCenter pilot has only been tested in Singapore and France. Before, Microsoft primarily outsourced its online ad technology from Overture, a company Yahoo bought.

But now Microsoft wants to roll out ads with its own in-house technology. And, by so doing, increase its share of the online ad market, which currently hovers at around only 10%. “We fully intend to grow this share through innovation and partnerships,” proclaimed CTO Ray Ozzie.

At the conference, executives said they are talking to advertisers like American Express, Toshiba and Cingular about advertising across their offerings. Bill Gates heralded the “Live Era,” and spoke enthusiastically of the emergence of the ad model. Many observers believe Microsoft's shift is smart.

Instead of relying on the upgrade cycle they have been dependent on, Microsoft is turning to more open-source methods and looking to ads instead of software sales for revenue.

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