March 25, 2004 12:43 PM PST

Ballmer: We fell down on search

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REDMOND, Wash.--Microsoft's failure to invest more in Internet search technology was a significant misstep for the company, but it is working to catch up, said CEO Steve Ballmer.

"People say that Microsoft does it all, but this is the case where we didn't do it all," Ballmer told an audience of marketing and media executives on Thursday, here at the software giant's fifth annual advertising conference. Then, like an eager football coach pumping up the team for the second half, Ballmer reasserted that Microsoft is still in the game and plans to win.

"You'll see a lot of good competition in the area," he said emphatically, at one point throwing his pen.

Microsoft faces an uphill climb to catch up in one of the Web's hottest arenas. It is working hard to close the gap, but it's so far behind that right now, it gets most of its Web search results from one of its biggest rivals: Yahoo. And this week, European antitrust regulators ordered major changes in the way Microsoft designs its software--a move that could hurt its ability to put new features, including search, in future versions of its Windows operating system.

Ballmer did not comment on the European ruling but did sound an upbeat note for Microsoft's growing impetus in search development. He said the company has hired many top search software developers and plans to be the absolute best in search over time. He also downplayed the mystical reputation of Google's search tool.

"There's no magic here; it takes good, hard work...and hard-core software" to deliver relevant results, he said.

Ballmer would not plot an exact time line for the launch of a new Microsoft search engine, but he said first-generation technology from its development team will likely appear in the next 12 months.

Billion-dollar ad brains
Attendance at its advertising conference more than doubled this year, according to Microsoft, signaling renewed growth in the Internet ad market and increased interest on Madison Avenue. MSN's chief revenue officer, Joanne Bradford, characterized the group as one of the largest gatherings of marketing and media executives to consider online advertising, who together represented more than $60 billion in promotion dollars.

The morning session focused on encouraging spending on online advertising and on outlining Microsoft's vision of the future. After years of losses, the company's Internet arm, MSN, reported its first profit in 2003. But Microsoft faces significant challenges, as customers gravitate from dial-up Internet access to broadband.

Bradford said MSN is pushing for 8 percent to 12 percent of every media plan to be spent online by 2005. To usher that along, MSN showed research that indicates that online media is increasingly influencing offline buying habits. The mantra: Online media is "accountable."

Ballmer went further, saying that in 10 years, all media dollars will wind up online, because the separation among PCs, televisions and mobile devices will no longer exist. He predicted that within a few years, people will watch most video via the Internet rather than on a TV set, because it's more organized and packaged there.

The comments worked as a pitch of Microsoft's free streaming-video service, MSN Video, to advertisers. Microsoft recently signed a deal to deliver Major League Baseball games online, and MSN Video is advertising-supported.

The Microsoft CEO went on to describe the migration of people connecting PCs to TVs as an early indication of a future technology and device-connected world, where everything is centered on a home computer.

"At Microsoft, we couldn't be more bullish about the impact of the tech revolution we're in the midst of. That includes the PC revolution...the Internet revolution...the digital revolution...and the wireless revolution," he said.

However, he did not give a time line for the introduction of new technology for targeted search advertising, which, he said, is harder to pin down. Although Ballmer didn't mention it, Paul Ryan, the executive in charge of building ad search technology, left Microsoft in January, after a tenure of only four months.

MSN recently said it would redesign its search results pages this summer, clearly designating commercial search results and playing up its own ads, as opposed to those generated by its partner, Overture Services.

Ballmer brushed off speculation over whether Microsoft plans to buy America Online.

"It's always inappropriate to comment on that kind of a rumor," Ballmer said, responding to a question from the audience. "We do have a good relationship with Time Warner...and we have a good, healthy competition with AOL."

Ballmer was also asked about when the company would let advertisers target consumers by their surfing habits and behaviors. He responded by saying the company will have some interesting new offerings in the next year but that it is "sensitive to thinking through user privacy online."

5 comments

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Internet Video VS TV
I don't know about that, I'm sure Mr. Ballmer would like it that way, but I personally don't want that much MS intrusion into my life. And, wait a minute, right at the climax of the Movie, Oh, Oh, here it comes, that impossible, never happens, especially with the latest and most expensive version of Windows, the BSOD (Blue Screen of Death) You know, in all the years I've had a TV (Yeah I know ancient Technology) I've only had power failures, but NEVER a BSOD
Posted by skibum2000 (4 comments )
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MS not ahead...just wait
Although Microsoft is currently not ahead in the internet search market, just give them a couple of years to bundle a revamped version of MSN Search into the next version of Windows to switch the 97% of users who run Windows from Google. It's a sure fire way to crush the competition, so far it's worked for IE and in the process of killing of RealPlayer with Windows Media Player.
The real question will be whether the DOJ will step in and block a MSN Search from Windows, or whether the EU will have to sue Microsoft themselves.
Posted by cokeguy17 (7 comments )
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Search problems
That's right. He couldn't find his butt with both hands.
Posted by bjbrock (98 comments )
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When will it be in the OS?
I just see this as a MS missed the point again and this reminder Bill did not write DOS he hired someone else to do it. Licensed WinSock and PPP (point to point protocol)and has pretty much bought up or has exclusive license to many protocols it never invented. Fact is they have set their sights on searches now.

Fact is they know their market share and will no doubt install their beta versions of a search engine that cannot be removed from the OS. And if it is questioned and they are found guilty by the time it is settled they will be #1.

Fact is Bill and Steve were not cool, have never been cool and will never be cool. Rich yes plow over other search engins yes after all they own the OS so I look forward to the next console OS not unlike the Console Stereo, the 6 foot long include everything thing now a collector item break one part it's a big hunk of wood and fun things that will place your searches into products and services served up my good old Microsoft. Price they paid Bill and Steve are not programmers never have been or will. They do not need to with a few billion dollars and owning 95% of desk top computers. They will be number one not for the value of their search but by the fact they own the OS.

MS

P.S. Sorry for the typos, it is a question of well this thing called a disability or forgetting and not seeing the same things others do so English and typo critics forgive me. Bill Gates cool (or sweet) to funny as will be their search engine.
Posted by (1 comment )
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Fetch, Don't Search
Search Service, even the best, is not good enough for any serious research / study.

The need is for a Fetch Service. The single window search field and matching the words with or without Boolean combinations may be easy but not applicable to any meaning or concept based matching.

The remedy is in accepting "Fetch Descriptors" of what is being sought.

For more e-mail pvn@hyd.cmc.net.in or putchavn@yahoo.com
Posted by pvn (2 comments )
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