I’m not sure if it was the green beer or yesterday’s overwhelming amount of media coverage devoted to Microsofts adCenter that has my head pounding this morning.

My bet is that rivals Yahoo and Google might be experiencing the same hangover as Microsoft continues it aggressive push into search and Web advertising.

Earlier this week Microsoft unveiled a prototype of its much-anticipated adCenter. Developed by the software giant, the product facilitates selling advertising based on key words consumers enter into the MSN search engine. MSN has been using Yahoo’s ad technology and that contract expires in June 2006.

The company is estimated to generate about $1.5 billion a year from Internet advertising, though Microsoft will not publicly break out how much of that revenue is generated by paid searches on MSN.

Microsoft Chief Executive Steve Ballmer told more than 500 big advertisers and marketers that search is just one piece of the company’s ad-selling platform. Speaking at Microsoft’s Strategic Account Summit, held Tuesday at in Redmond, Wash., Ballmer says the company plans to use the platform as a base to expand into other media such as television. Microsoft figures it won’t be long before people begin watching programming delivered over the Internet rather than via the traditional airwaves.

Although journalists were barred from the summit (boo), Microsoft extended a hand to rivals and marketplace leaders Google and Yahoo. Google Chief Executive Eric Schmidt and Ted Meisel, president of Yahoo Search Marketing and senior vice president of Yahoo, each gave talks on the state of Internet advertising.

But many industry watchers claim adCenter is such a big deal that Google and Yahoo should be very concerned. Jupiter analyst Gary Stein says in his blog that Microsoft did not enter this space with a ‘me-too’ product.

Forrester Research’s Jim Nail was widely quoted praising Microsoft’s adCenter technology as an “innovation” that will “set off a chain reaction” that will force Google and Yahoo to respond.

Similar to products already out there, adCenter has a Web-based control panel that enables advertisers to choose and buy keyword-based advertising. But Microsoft went a step further by allowing advertisers to target specific customers based on demographic information. Advertisers are then provided with reports on who actually clicked on the ads, not just who looked at them.

Microsoft’s paid search platform will provide detailed information, such as gender, age and location, for many people who use its search engine, allowing advertisers to target their ads to a specific audience.

Here’s an example of how that might work: A company could buy an ad that appears when 30 to 40-year old women in San Francisco making more than $50,000 a year search for shoes on MSN’s page. AdCenter can do this by using the information provided by customers who registered for its services such as Hotmail. It also uses information from those who customized the MSN home page to fit their interests. That information is supplemented with data purchased from credit bureaus and other public demographic information.

Microsoft’s move into this potentially lucrative area capitalizes on detailed demographic information the software company has gathered over the years, raising privacy concerns for some.

It’s probably no surprise that Microsoft has been tracking user information for many years across its various sites including MSN and Hotmail. The company’s huge database, which has data on tens of millions of individuals, has assigned each individual a global user ID.

However, past criticism from privacy advocates has kept the company from using any of the personal data. Some still fear that the Microsoft’s moves are Big brother-like. But Microsoft is not alone is in this. Google scans content to plant relevant ads for its free e-mail service. Yahoo uses some personal information gathered from its customers to target advertising on the Yahoo network, but it does not provide that service for outside clients like MSN.

So as the industrywide trend of using personal information to garner advertising dollars continues and the Internet becomes more invasive, we have to wait and see when adCenter is launched in the US. A version of Microsoft’s adCenter platform is currently being tested in Singapore and France. It is expected to expand into other regions but Microsoft would not give specific details.

Let me know what you think about how Microsoft might change the search and Web advertising landscape. Or just give me your best hangover remedy.