Google Not in Microsoft Crosshairs, Ballmer Claims

But Microsoft CEO admits his company wants to replace Google as top Internet ad revenue recipient.

SAN FRANCISCO -- Microsoft chief executive officer Steve Ballmer today downplayed his company's rivalry with Google, saying Microsoft is more focused on creating Internet content and other services that will lure advertising revenue than on what Google specifically is doing.

The thought echoed a comment made by Google cofounder and president of products Larry Page at a Google press event the day before. Page said that Google is too busy creating its own services to cast more than a wary eye on Microsoft. But despite all the tough-guy posturing, no one would deny that Google and Microsoft are on a collision course, at least in the Internet advertising arena.

Ballmer confirmed this, saying Microsoft is determined to climb to the top of the Internet advertising revenue chain from its current number three position. That means Google, which is number one in Internet advertising revenue, is in the company's way, he said.


Heading Up the Food Chain?
"We'd like to be number two and then number one in advertising," Ballmer said in answer to questions from Roger McNamee, cofounder and general partner of venture capital firms Integral Capital Partners, Silver Lake Partners, and Elevation Partners. When asked about Microsoft's position in relation to Google, Ballmer skillfully redirected the conversation to Microsoft's plan to provide Internet-based services and content through its Windows Live, Office, and MSN brands to create "collateral" for advertisers.

"Let's not focus on Google," he said. "The key is, what about the advertising business model? Have we done everything we need to do to drive advertising as a business model?"

Ballmer acknowledged that Microsoft arrived late to the Internet advertising market, but the company's plan to invest $2.4 billion in research and development next year--at least $1.1 billion of that in its MSN online property, which includes its advertising platform, AdCenter--will change that.


Microsoft's Plan
"In creating AdCenter, we think of it as an eBay for advertising. How do you bring buyers and sellers of advertising together? How do you do it in a way that creates value for both of those?" Ballmer said. "We think we have a lot of ideas around that topic, but in a sense we're a Johnny-come-lately. The guys that came first were Overture, then Google, and we're late to the game, but we get what's going on."

Ballmer also cited Microsoft's long history of patiently chipping away at a market until it achieves domination as a precedent for its plan to overtake competitors, including Google, in Internet advertising.

"People said we wouldn't get the browser right, and we did," he said. "People said we wouldn't take care of Novell [on the OS front] and we did.... We will show our usual innovation, but also our patience. It distinguishes us from technology companies that aren't so patient."

Ballmer added that, realistically, it could take Microsoft about five years before it achieves its Internet advertising goals.



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