Microsoft CEO Steve Ballmer told a gathering of Web developers in Las Vegas that he sees the company's proposed acquisition of Yahoo as the key to successfully competing with Google. Online advertising is currently "all about Google, Google, Google," Ballmer told former Apple evangelist Guy Kawasaki during a MIX08 on-stage interview. "We have real commitment, real aspirations and real tenacity about being a serious player, and yet we have a long way to go," he said.
"We have to have a strong position in online search if we are going to have a strong position in online advertising," and that's where Yahoo could really help Microsoft reach "critical mass," Ballmer said.
The Value of Scale
Scale -- which Ballmer called a form of synergy -- is an important advantage in the search game, he said. "The more searches you have, the more advertisers you have; the more advertisers you have, the more bidding you get on key words; and the more revenue you make, the more you have to invest," Ballmer said.
At the same time, however, the more advertisers a company has, the larger the collection of relevant ads it has to insert on pages, Ballmer said. "In the case of search, ads are part of the content and right now Google has a larger body of ads to insert on any key word that we or Yahoo have," he explained.
Though Microsoft's unsolicited bid for Yahoo could help level the online playing field, Ballmer said some streamlining will be needed if the deal goes through. "It won't make sense to have two search services, two advertising services, and two mail services, so we'll have to sort some of that through," he said.
The Untold Story
Ballmer sees Microsoft's efforts to increase its presence in the online advertising and consumer-devices arenas as essential for long-term viability. "In this industry, I think the great companies either move forward or they become less relevant," Ballmer said. "I don't really think there's an option called 'Do the same thing for a hundred years and never broaden your footprint.'"
Microsoft's recent acquisition of Danger is just one example of how the software giant is attempting to build its skill set for consumer devices, Ballmer noted.
"The Danger acquisition is really about essentially building up an application and service asset on top of our Windows Mobile platform," Ballmer told MIX08 attendees. "Danger really is part of a strategy to do consumer-oriented applications and services on top of Windows Mobile, just like some of the things we've done with our enterprise software."
Beyond its proposed acquisition of Yahoo, Microsoft is focusing on the development of Internet Explorer 8. "Firefox has certainly built presence and position over the course of the last couple of years," Ballmer said. "So you now see us investing as heavily as we ever have in the browser, which is very important to us."
MIX08 had earlier touched upon the major browser improvements of interest to developers, but Ballmer said a lot of the IE8 story remains to be told from the end-user perspective. "You should expect to see a lot of browser innovation, which is core for us," Ballmer said. However, the ultimate measure of IE8's success will be "how well we do versus Firefox, Safari and the other browsers out there," he said.