Microsoft will invest more than $500 million in its first major European datacenter, designed to support applications delivered over the Internet, the company said Tuesday.

Microsoft said the "mega datacenter" will be needed to support rising demand for Web-based audio and video applications throughout Europe, the Middle East and Africa.

The center will support services such as its MSN portal and Windows Live, a batch of online services that include Hotmail, photo sharing, blogging, and online storage.

Construction on the 550,000 square-foot facility, at Grange Castle Business Park in Dublin, will begin this month and should be completed by mid-2009. The company will spend $500 million to construct the datacenter and then more to kit it out with tens of thousands of servers.

Microsoft has been racing against more Web-centric companies like Google and Yahoo to shift some of its business from software applications installed on computers, to services that replicate many of the same functions but are delivered through a Web browser.

To keep up with demand for the services those companies require large datacenters, often built in rural areas that have cheap and plentiful electricity.

In July Microsoft opened a similar-sized data center in San Antonio, Texas. Both Microsoft and Yahoo are also building datacenters in Quincy, Washington.

Google is also on an aggressive datacenter building campaign, announcing this year it would build datacenters in Lenoir, North Carolina, and Goose Creek, South Carolina, and Council Bluffs, Iowa, at a cost of around $600 million each.