Microsoft

In some senses, Tami Reller has one of the toughest jobs in technology. She is tasked with selling Windows 7 in the wake of Windows Vista and amid a relentless assault from Cupertino in which the PC is depicted as slow, virus-ridden, and buggy.

Tami Reller

(Credit: Microsoft)

In another sense, though, her job is getting a lot easier. After three years of trying to muddle through Vista, Microsoft is ready to release Windows 7--a product that, by most accounts, is much better than its predecessor.

A lot has changed since the launch of Vista, including nearly all of the faces at the top of the organizational chart inside of the Windows unit.

The most notable change is the ascension of Steven Sinofsky, who shifted from heading Office development to spearhead Windows 7. He now runs the entire Windows division. More recently, though, Reller was tapped to lead Windows marketing.

In an interview late last week, Reller shared her thoughts on the launch of Windows 7 and fielded some questions about how Microsoft is handling some thorny launch issues, such as the fact that Windows 7 is a less-than-simple upgrade from Windows XP.

Below is an edited transcript of our interview.

Q: The Windows 7 launch is coming up on the 22nd. What do you guys have in store?
Reller: I would first start by saying that the market is ready. I mean, the market is ready for us to launch Windows 7, and we are ready to bring it to market. And I think the "we" includes not only all of us here across the company, but also our OEM partners (original equipment manufacturers) with which we've been working so closely, the retailers, both e-tailers and traditional retailers, which are ready to take this to market. So we are ready for October 22.

How has the relationship with computer makers evolved versus where it was with Vista?
Reller: The relationship, and how we've together engaged and brought Windows 7 to market, has changed. And it's changed in an incredibly productive and positive way. In fact, just yesterday, we had time with the Dell leadership team, and I think it's a very good example of just how, from the very start of the process, we had deep technical engagement, and we had deep business-planning engagement, setting collective goals and just being clear on what each other's priorities were.

We've seen a bunch of computer makers announce Windows 7 models. Are there more rabbits that will be pulled out of the hat, or have we seen the most exciting PCs we're going to see at launch?
Reller: You'll see a few more new PCs, for sure, in all categories, whether they're gaming machines, new notebooks, or new Netbooks.

What do you see as the key feature or selling point of Windows 7?
Reller: It's fascinating. Many of us have gotten into the habit of asking, "Hey, what's your favorite Windows 7 feature?" It's a good way to engage. The good news is, because we have 8 million enthusiasts, there's a good amount of people to ask. And everyone does have an opinion.

You've got the road warrior workers, which make up a good part of the enthusiast crowd. For them, wireless is big. For the power productivity worker, Snap is huge. (Snap is a feature that lets a user manage windows by dragging an open window to one corner. It then "snaps" to fill half the screen.) There are two features that are completely common, and that is just faster (booting) and faster resume (from sleep). It's like, hey, my PC is available when I need it. The second is just the clean (user interface).

And did you have one of the Windows 7 house parties?
Reller: Mine is happening after October 22nd, just based on when I can fit it in. But I'm attending some as well.

Just as an anecdote, I often have roundtables with about a dozen or so people across my team, and I've done this for a long time. And I had one the other day, and it was most of my finance folks, who aren't always the most outgoing group. That's not always what they're known for. It was fascinating, because instead of talking about this finance process or this number, all they wanted to do was talk about their launch parties.

What was the cleverest thing that one of them did?
Reller: OK, so this was my finance team. One built (a launch party) into sort of a fantasy football theme. That was creative. The other was sort of building a montage from a vacation that a bunch of them had taken together.

Shifting gears a bit, how does Microsoft plan to advertise Windows 7? What's the pitch? With Vista, it was The Wow Starts Now. How do you advertise Windows 7?
Reller: One is, letting the product speak for itself, and letting the customers do the talking, and building a community around all of that. And you'll see that common (theme) in our marketing holistically--you know, advertising being a piece of that.

Should we expect to hear more from Kylie, or probably hearing from other voices post-launch?
Reller: Kylie has been great. I mean, she's been a fabulous spokesperson that a lot of people resonate with. There will be more. There will be more voices.

Any celebrity Windows 7 endorsers beyond, I guess, The Family Guy?
Reller: It really is about our sort of real customers. I mean, that's how you should think about our focus. It does seem like this launch is a little more low-key than past--particularly Windows--launches...With Vista, there were acrobats on a billboard. There have been other stunts for other things.
Reller: I think there (are) two reasons. One is that we're living in a different world today. I mean, communication flow is much more instantaneous, and so we've really tried to think about how we communicate through the whole life cycle of Windows 7.

The second thing is, from the way that we plan the product to the way that we market to the product, to the way we sell the product, to the way we engage with our partners, it's been collaborative. It has been letting the product speak for itself. And we'll stay true to that on October 22, and we'll stay true to that post-October 22, which just results in sort of (fewer) acrobats and more customers.

How much attention are you personally giving to Netbooks, given that they've commanded so much of the market and account for so much of the growth in the market?
Reller: It's been a very interesting scenario to watch. What we've seen is that customers are thinking about how to use PCs in new ways, which I think has inspired a lot of creativity among all of us...I think that Netbooks have a purpose, and Netbooks have some limitations. I think that the screen size and the keyboard size are intriguing, but they may have less long-term use than I think some people initially think about.

That sounds like a nice way of saying what Michael Dell said more bluntly a few days ago--that basically, they're fun for the first 72 hours, and then people wish they had a PC. That does seem to be an issue, given that people are ascribing the experience they have with that Netbook to Windows.
Reller: I think that there are two important points. One is that Windows 7 will run brilliantly on a Netbook. No. 2, there are a lot of thin, high-value notebooks coming to market that will give people long battery life and performance, and be light. And so there will be a whole new class of notebooks, which will fill many of the demands that customers were looking for in the initial Netbooks.

After the launch on October 22, are we going to see Windows Vista anywhere other than sort of on the clearance rack?
Reller: I'll answer where I started, which is, the demand for Windows 7 is high, very high. We will see customers both upgrading and gravitating toward new PCs with Windows 7, no doubt.

You're relatively new to the Windows team. What lessons do you take away from Windows Vista? I've talked to a lot of the folks that have been in Windows a long time, and they've sort of shared what they've learned from the Vista "challenges."
Reller: I talked about the ecosystem a lot, and for a good reason. And I think that is such an important lens for us always to keep, as we plan a product release and as we take a product release to market: Our ecosystem needs to be involved from the start, and the readiness of our ecosystem, when we launch a product, is a huge priority. And we are ready. I mean, the ecosystem is ready, applications are compatible, devices are compatible, our OEMs are ready to sell...but machines that light up on Windows 7. So, that's a big, important front and center lesson.

The second thing I would say is that there's a convergence between what consumers use at home, what users use at home, and how they think about that deployment in their business, regardless of the business size. And so generally, end-user acceptance and enthusiasm for a product matter. And that's why we've put so much emphasis on the last year, in making sure that we had strong, strong engagement from users broadly across many demographics.

Do you think the fact that Vista wasn't terribly popular among consumers hurt it, in terms of what we've seen as its relatively low enterprise adoption, and conversely, that if Windows 7 gains enthusiasm among consumers, we might see businesses move to it more quickly?
Reller: Yes. We are confident that Windows 7 deployment in the enterprise will be helped by end-user enthusiasm for Windows 7 at home and at work. There's an absolute correlation.

Microsoft is opening two retail stores this month. What role do you think those stores are going to play in the launch of Windows 7 through the holidays?
Reller: It will showcase the strength of the ecosystem together with Windows 7, and it will allow this connection with customers, and we'll learn together with the partners.

Apple has said it sees Windows 7 as a chance to attack Microsoft and even gain share. I'm curious how you see things.
Reller: We think that the market is ready and very, very interested in Windows 7. And we are quite confident. The range of PC choice, the clean new user interface, and great media functionality make Windows 7 even more appealing to a wider range of customers. It's a great time to be a PC.

It seems as if the softest part, if you will, is the case for those on Windows XP. The fact is that, for most of those who want to move, it basically means getting a new computer. When I've talked with folks, the sense they get is, any time you get someone to buy a new computer, it's a chance to get them to switch platforms. I'm curious how you are thinking about what do you do for those XP users.
Reller: Our XP customers have great options. They will have the widest array of new PC choices at just about every price point and with whatever types of functionality they're looking for. So, (it's) sort of the best time ever for Windows XP customers to think about whether a new PC is the right answer for them. Frankly, part of October 22 is going to be all about some screaming deals, which will I think really resonate well with that audience.

And then for some XP customers, an upgrade is the right answer. And we have been laser-focused on making sure that experience, for them, is one where we provide them the tools and the answers and the capabilities in our channel to make that a good experience. They've got choice.

I'd be remiss if I didn't bring this up: One of the loudest pieces of feedback that I tend to get is from Vista Ultimate customers wondering, hey, with Vista Ultimate, we were promised sort of the best experience--all these extras we didn't get. And then you had limited-time offers on Home Premium and Pro, but there really wasn't any way for Vista Ultimate customers to stay at the same version on Windows 7.
Reller: A couple of things: One is that obviously, some of the launch party kits did reach a number of our enthusiasts and some of our strongest enthusiasts, who would have been Ultimate users. A number of our Ultimate customers did take advantage of the Pro offer. There will be some interesting deals from OEMs and through our retailers to come. So it's definitely our goal to make sure that our Ultimate, enthusiast customers find a great path to Windows 7.

What can people expect on the 22nd at retailers?
Reller: Two things. One is, they can expect retailers to be ready. They have the training, and they are well-equipped. It will be obvious that Windows 7 is here, so they can expect retailers to be ready. And the most important thing they can expect are great, great deals. This is where we've put a lot of coordination effort, to make sure that customers more than ever get some great, great value, starting on October 22 and continuing.

Do you know if any stores are planning to be open at midnight?
Reller: There are (stores planning to be open then).

I know when Vista launched, Bill Gates went on "The Daily Show." Any plans for any late-night TV appearances?
Reller: You'll certainly see a lot of coverage from us that day, but no commitments on the exact venue.

With Windows Vista, Microsoft staged a fancy launch, complete with this human billboard in New York City. Thursday's launch is expected to be a bit more subdued.

(Credit: Caroline McCarthy/CNET News)

With Windows 7, Microsoft is going back to basics.

It's true of the product, which is as notable for its everyday performance as any one new feature. It's also true of how Microsoft plans to launch the new operating system on Thursday.

Rather than go for flash, the company is focused on making sure that all of its partners are ready to sell lots of PCs and copies of Windows 7.

"We're living in a different world today," Microsoft Vice President Tami Reller said in an interview with CNET News.

Microsoft is hoping to strike a contrast with the launch of Vista, which was marked by ambitious marketing (Remember "The Wow starts now"?) but a product that wasn't fully baked, nor were other software and hardware makers ready for the big changes that came with Vista.

Windows 7, meanwhile, offers only minor changes to the Windows core from Vista, and aims to be faster and easier to navigate than its predecessor.

Reller said the goal with the marketing of Windows 7 is to let the product speak for itself. Early ads have featured Kylie--the perfectly precocious preschooler--reading some of the product's positive reviews.

"We'll stay true to that on October 22, and we'll stay true to that post-October 22, which just results in sort of less acrobats, and more customers," Reller said, adding that there will be more than just Kylie.

Among the promotions Microsoft tried with Windows Vista was an outdoor human billboard, which left spectators--quite literally--out in the cold on a very nippy New York day.

Microsoft said this time around, it is putting nearly all its energy on getting the product in front of as many people as possible. As has been the case with past Windows launches, there will be plenty of specials and promotions tied to the Windows 7 launch. Customers, she said "can expect great, great deals."

"This is where we've put a lot of coordination effort to make sure that customers more than ever get some great, great value, starting on October 22 and continuing."

And, of course, Microsoft is planning a massive advertising campaign to promote the product. The launch of Windows 7 is key for Microsoft, which gets a huge chunk of overall sales and profits from Windows.

Although some PC makers have already started introducing their Windows 7-based models, Reller promised there are other machines yet to be announced.

"You'll see a few more PCs for sure in all categories, whether they're gaming machines, whether they're new notebooks, a few new Netbooks," Reller said. "You will see more."

Some stores will also open at midnight, Reller said, without offering specifics. Microsoft itself is opening its first retail store--in Scottsdale, Ariz.--to coincide with the launch, although that store opens at 10 a.m. on Thursday. Sources said to expect a celebrity or two, plus some nice goodies for whoever happens to be the first to walk out of the store with a copy of Windows 7.

Microsoft is also opening a "Windows Cafe" in Paris, though that location will be selling lattes rather than laptops.

As for formalities, Microsoft plans launch events around the globe, with Windows unit head Steven Sinofsky in Japan kicking things off, followed by Julie Larson-Green at an event in Britain and finally, (due to time zones) Steve Ballmer presiding over the main event in New York.

Microsoft will also ring the opening bell on Nasdaq on Thursday, while Microsoft will join with its computer maker partners to end the day's trading.

Unclear is whether Microsoft will be making a return appearance to late-night TV. With the launch of Vista, Bill Gates took to the Daily Show stage, talking tech with Jon Stewart.

"You'll certainly see a lot of coverage from us that day, but no commitments on the exact venue," Reller said.

I'll have more from my interview with Reller in a post on Tuesday morning, including her thoughts on Apple and those now-infamous Windows 7 house parties.

Update, 6:05 p.m. PT: Most retailers have not yet posted their Windows 7 deals yet, but Office Depot has an online ad up touting hundreds of dollars of "free after rebate" software with the purchase of Windows 7.

Aiming to crack down on a growing problem, Microsoft said it filed five lawsuits Thursday against parties it suspects of posting online advertisements laden with malicious code.

Microsoft has tried to work with ad networks to thwart such "malvertising" in the past, but this is the first time it has gone to court.

"Our filings in King County Superior Court in Seattle outline how we believe the defendants operated, but in general, malvertising works by camouflaging malicious code as harmless online advertisements," Microsoft Associate General Counsel Tim Cranton said in a blog posting.

In each case, Microsoft is suing the unknown parties responsible for the ads.

"Although we don't yet know the names of the specific individuals behind these acts, we are filing these cases to help uncover the people responsible and prevent them from continuing their exploits," Cranton said.

In the past week, The New York Times' Web site was hit with a rogue advertisement that told readers that their computer may be infected with a virus and redirected them to a site that purports to offer antivirus software.

"Scareware is often distributed among criminals, which therefore results in many of the animations a user may see utilizing a common design and interface," a Microsoft told CNET News. "However, without additional information and specific details about the attacks, we cannot be certain that any of today's filings directly relate to the attacks on The New York Times' Web site."

Microsoft likened the latest lawsuits to prior legal action that it has taken against those suspected of click fraud or instant messaging spam.

"This work is vitally important because online advertising helps keep the Internet up and running," Cranton said. "It's the fuel that drives search technologies. It pays for free online services like Windows Live, Facebook, Yahoo, and MSN. Fraud and malicious abuse of online ad platforms are therefore a serious threat to the industry and for all consumers and businesses that rely on these free services."

MONTREAL--Just as I was wrapping things up for the evening at the National Lesbian and Gay Journalists Association convention here, I happened to catch Microsoft's new Windows 7 commercial.

Bringing back the ever-so-cute Kylie from Microsoft's earlier Windows ad was a good choice, but evidently the musical choice could prove to be unfortunate.

As Europe's "The Final Countdown" played, I was nonplussed, but a fellow convention-goer immediately started laughing.

Apparently, that same song is used on Fox's "Arrested Development" just before the character Gob is about to see his magic trick go awry.

"Unless that's ironic, the choice of music is hilarious," said Trey Graham, editor of the NPR culture blog Monkey See and an self-identified Mac geek.

Music aside, Microsoft has a lot more than Vista's "wow" to tout, using various positive reviews (including comments from CNET) and touting the product's October 22 launch.

Digital-ad campaigns have proven stubbornly challenging to plan and track. Microsoft hopes to change that.

The software giant announced on Thursday a new collaboration with consumer measurement firm ComScore to design a digital media-planning service dubbed the Reach and Frequency Planner (RF Planner).

The goal of the RF Planner will be to help brand advertisers better measure and track their online-ad campaigns. Advertisers would be able to more easily determine and predict how consumers will respond to their digital ads.

Microsoft says online advertisers have been stymied by the inability to measure digital-ad campaigns with the same metrics used for offline campaigns. The company points out that ad budgets for brand advertisers account for about two-thirds of the $186 million U.S. ad market. But only 5 percent of those dollars are spent on Internet advertising.

By teaming Microsoft's ad data with demographics from ComScore's research, the companies want to provide advertisers with the same tracking information they would have with an offline campaign.

"The perception that traditional branding metrics are not possible or meaningful for digital media is misguided," said Scott Howe, corporate vice president of the Advertiser and Publisher Solutions group at Microsoft. "We believe online advertising won't maximize its appeal to brand marketers until the basic metrics they've relied on for years are available in digital-media plans."

Microsoft said closed beta testing of the RF Planner will start immediately, with a select number of advertisers coming aboard.

Microsoft has been pushing for a greater foothold in the online-ad game. Thanks to Wednesday's agreement with Yahoo, the company gains a bigger chunk of the search market, potentially translating into healthy advertising dollars.

Investors panned Yahoo's search and advertising deal with Microsoft on Wednesday, sending Yahoo's stock down 12 percent. IDC's analysts called it a "strategic mistake."

But here's what's good about it: After a year and a half of public scrapping, behind-the-scenes drama, and dysfunctional communications through leaks to the press, Microsoft and Yahoo now can get back to business.

The Microhoo concept has been reduced from a giant cloud of uncertainty hanging over both companies to merely a complicated partnership between two rivals with Google as a common foe. The range of possibilities for Microsoft and Yahoo, which ran all the way from nothing to Yahoo disappearing altogether, has been pruned back to a much more manageable scope.

Nobody will notice any difference immediately from the outside. First comes regulatory scrutiny, with the companies hoping for approval in early 2010. But already, the deal provides a framework that should make it easier for the companies to establish their new identities.

With Microsoft acquiring license to Yahoo's search technology, applying its search-ad auction process to both companies' searches, and offering jobs to many Yahoo employees, it appears Redmond is carrying more of the Ph.D.-intensive fight to Google. Yahoo, keeping its display advertising business and focusing on its home page redesign, becomes more of a hub for people's online activity and platform for outside Web sites' developers.

Some awkwardness remains where those two visions overlap. One is the work Yahoo has done to augment search results through a program called SearchMonkey, which can interpret tags on others' Web sites so they can be spruced up with new information when those pages appear in search results. To work, it requires the cooperation of the Web crawlers that index the contents of Web pages and the servers that present the search results.

To me, that looks like the sort of chore that will require Microsoft and Yahoo to work together in search. Fortunately, Microsoft and Yahoo have a 100-page playbook that had better address such aspects, and Microsoft Senior Vice President Yusuf Mehdi declared Wednesday he likes the SearchMonkey approach.

The companies also gave themselves two full years to fully implement the deal, too, so there's time to work out such details. In the meantime, Yahoo can't afford to stand still. SearchMonkey is one element of a new hybrid search page that Yahoo said it will start testing with its users starting in August.

There's some important context for these changes and for the Microsoft-Yahoo deal: search results are growing beyond the plain list of 10 hyperlinks with accompanying snippets of text. Google, for example, blends in ever larger quantities of "universal" search results such as maps, YouTube videos, photos, and news.

Yahoo plans to make its search pages more like its main page.

(Credit: Screenshot by Stephen Shankland/CNET)

Yahoo's new search results page include not only SearchMonkey, but also display advertising and the key element of its new home page, a customizable list of applications down the left side. The search results themselves become just part of a broader package, so Yahoo outsourcing the actual search engine duties to Microsoft isn't giving away as much of the core business.

Outsourcing search has a cost, of course. The partnership means Yahoo will get only 88 percent of search-ad revenue on its sites for the first five years, down from 100 percent today. Yahoo, though, also gets lower operational expenses and thus, it expects, greater profitability over the long term. Yahoo expects $275 million more each year in operating cash flow.

Carol Bartz, Yahoo's new chief executive, has shown herself to be a pragmatist who prefers picking her battles. With the Microsoft deal, she's chosen to sit a big one out, freeing the company from having to out-Google Google. What the company sacrifices in ambition it gets back in goals that are actually attainable.

For Microsoft, though, the struggle against Google becomes more intense. The combined search market share of Yahoo and Microsoft still is half what Google has, and the fact that Wednesday's Yahoo pact is smaller in scope than some earlier possible incarnations means Microsoft has that much more hard work before it.

The company clearly wants to make a third big business out of its online operations to complement its Windows and Office cash cows. Getting Yahoo's search technology and Web site traffic gives it a better stronghold but by no means a victory.

Microsoft is putting Internet ad agency Razorfish up for sale, according to a Financial Times report Sunday.

Microsoft, which acquired Razorfish in 2007 as part of its $6 billion takeover of Aquantive, has reportedly hired Morgan Stanley to find a potential buyer. The report identified French marketing company Publicis Groupe as a potential buyer.

Formerly known as Avenue A/Razorfish, the agency was credited with designing the logo for Microsoft's new search engine Bing, as well as creating the online ads for the ensuing publicity campaign. The Seattle-based agency has more than 2,000 employees and counts Dell, Disney, and Nike among its clients.

One analyst cited in the FT.com report estimated Razorfish could be worth $600 million to $700 million.

Representatives for Microsoft and Razorfish did not immediately reply to requests for comment.

The deal for Aquantive was Microsoft's largest ever and highlighted the importance of supporting more-advanced advertising products and technologies across areas including media planning, video on demand, and Internet Protocol television. The acquisition of Razorfish specifically was considered especially important as a way to give Microsoft a new presence in the ad services business and also help promote its rich media and video plug-in Silverlight.

Microsoft faces several tough problems in trying to market Bing, its revamped search engine.

The first issue, is of course, that Google has become essentially synonymous with search.

"Google is so much a part of everyday culture," said Danielle Tiedt, general manager for marketing in Microsoft's online unit. "It is the verb. If you talk about search you talk about Google."

The second issue, also a thorny one, is that people tend to think they are pretty happy with search. When they have problems, they tend not to blame their search engine or look for alternatives, Tiedt said.

"We know there is this latent dissatisfaction in the search market," Tiedt said. "When people don't get right search result they thing it's their fault."

Microsoft's huge TV ad campaign, which kicks off on Wednesday, aims to put a name to the problem and pitch Bing as the answer.

"A big part of the campaign is 'It's not just you'," Tiedt said. The ads will run first on CBS' "CSI: New York" and Fox's "So You Think You Can Dance." (Disclosure: CNET News is published by CBS Interactive, a unit of CBS.)

Bing started to be publicly available on Monday, but officially launches Wednesday, following months of development and internal testing. Microsoft CEO Steve Ballmer showed off the company's effort last week at the D: All Things Digital event in Carlsbad, Calif.

Microsoft isn't saying just how much it is spending on the ad campaign, though advertising trade magazines have estimated it at between $80 million and $100 million.

"Obviously, we are spending a significant amount of money," Tiedt said. "We're trying to get entered into the conversation of search. We are spending enough money that people (will) have heard of us."

The initial video spot will run for about two weeks, followed by more lighthearted ads that try to illustrate the challenges of search today. The next wave of ads, Tiedt said, are dramatizations of what it would be like if people had to talk to their partners or friends the way they do to a search engine. They get back responses that have the same words as their question, but nothing at all to do with what they asked.

Next month, Microsoft will start doing more product-specific TV ads that look at specific areas such as travel search.

An online ad push also starts Wednesday, with Bing ads on the front of MSN.com. The ads will move throughout the Web and Microsoft is also doing some things on Facebook and Twitter, including a photo contest where the community will get to choose a winning photo to become the backdrop for Bing itself on a particular day.

The TV spots are being done by JWT, while Microsoft's Razorfish unit created the online ads.

One of the things clearly worth noting about Tuesday's announcement about a $200 million investment in Facebook is the fact that it values the company at $10 billion, down a third in the 18 months since Microsoft poured $240 million into the company.

However, the fact that Facebook isn't worth $15 billion, while confirmed on Tuesday, has been pretty well understood for some time. Ever since Microsoft took its stake, there have been questions about what the social network was "really" worth.

The $200 million investment announced Tuesday came from European company Digital Sky Technologies, which now has about a 2 percent stake in the social network.

Although Microsoft may have to take a write-off at some point, the deal was never about the return on that initial investment. Rather, Microsoft saw the deal as the price of admission to get an advertising deal with the social network. At the time, Microsoft had lost several recent deals to Google, including one with MySpace that has also been criticized since for being too generous to the social network.

To land the Facebook deal, Microsoft had to win a bidding war with Google.

Facebook CEO Mark Zuckerberg also noted on the conference call on Tuesday that Microsoft's investment "was part of a broader relationship."

"We feel good about the progress we've made," he said.

CNET News' Rafe Needleman contributed to this report.