NEW YORK Microsoft needs a "set change" when it comes to its search business, and the long-discussed and still-very-much-on-the-table partnership with Yahoo would go a long way toward reinvigorating the software giant's anemic position in that space.
That's according to Microsoft CEO Steve Ballmer, who sat for a lively keynote interview on Thursday at the McGraw Hill Media Summit in New York. During the session Ballmer said that after recently speaking with the newly installed Yahoo CEO Carol Bartz, he's hoping that a search deal between the companies can be revisited -- since their combined market share would significantly enhance Microsoft's foundering search product and is "fairly compelling economically."
Microsoft's Live Search product, which typically commands a 10 percent share of the market, "could use a set change," acknowledged Ballmer. That's where Yahoo's roughly 20 percent share could make a huge difference. "It's not about Yahoo's technology," he said. "It's really about getting [Yahoo's] volume. You can improve your product faster if you have more users."
Currently, while delivering a quality product, Live Search is limited in how many advertisers it can attract and the relevancy of ads because it only handles so many search queries, said Ballmer. Yahoo's search traffic would make the product that much better. "Putting together the scale is valuable," he said.
Ballmer also alluded to a branding challenge for Live Search, but was coy when asked about Kumo, a new search brand/product that Microsoft is rumored to be testing internally. "Marketing is an issue, brand is an issue," he said. "But it creates an opportunity."
The opportunity Microsoft sees lies in improving the user experience for search and the overall relevancy of search results -- themes that former Microsoft chairman Bill Gates has echoed for years, ever since the company decided to take on Google. "There is lots of innovation to come [for search]," Ballmer said, while admitting that the company may not have realized how challenging competing in this segment would be when it first set out. Search is "a lot bigger than maybe we knew before we got into it," he said. "The table stakes turned out to be bigger."
Besides search, the boisterous Ballmer touched on a number of industry issues during the interview, from the state of the economy, the future of "cloud" computing and what he believes are Microsoft's biggest growth opportunities in the near future (he mentioned China and search, but surprisingly not online advertising).
But the topic that really sparked the animated CEO was competing with Apple in the PC and mobile markets. Ballmer offered that the current recession was actually helping the PC market, since Apple computers are typically priced at a premium. "The economy is helpful," he said, especially when shoppers are being asked to spend an extra $500 for a computer "with a logo on it."
Asked if he owns an iPod, or any Apple products for that matter, a smiling Ballmer quipped, "I don't. My sons don't. My wife doesn't."
