A Conversation With Ballmer

Following his speech at the MSN Strategic Account Summit, Microsoft CEO Steve Ballmer sat down with Adweek to discuss the company’s push into advertising, the effects of the shift to digital media and the pace of innovation at Microsoft.

Why is advertising important to the future of Microsoft?

If you take a look at reading, publication, collaboration, TV, radio, search and shopping, software will be the core innovation behind a lot of those things. And there’s certainly a class of consumer for whom the best way to profit and monetize that, possibly the only way, will be to provide those software experiences funded by advertising. It’s a little like getting into the TV production business and saying, “I’ll only make programming that’s paid for and won’t run ads.” It wouldn’t make any sense. The business models have evolved. We see great opportunities financially, but also to give our customers experiences that are rich and exciting and low cost to them, and at the same time give advertisers an audience they really want.

What do you think Microsoft will bring to advertising?

I hope we bring technology and audience. The technology that will shape, deliver and target advertising is going to continue to evolve. Advertisers, ad agencies, everybody should be excited to see a couple or three companies really put a critical mass of R&D behind technologies that change the ad industry. No. 2 is audience. There are a lot of things people do with Microsoft software that would be appropriate for advertising, whether it’s Windows Live or MSN or Xbox Live. We want to bring both audience and technology to advertising.

Where do you see advertising going in five years?

It will all be digital. Absolutely, it will all be digital. What that means is that media will be interactive, and the creative will also be interactive. It’s a huge, huge change. We’ll have the ability to get good users’ knowledge, and a user’s activity, not just demographics—with users’ permission, of course. How do we sustain and feed and tailor and give this person what they’re interested in? I think it’s very important.

Do you see adCenter moving beyond demographic data and targeting behaviors?

Absolutely. Everything here is premised on having a good healthy dialogue with the users, about how we use the users’ activity and information to better support our interaction with them.

How do you do that?

You have to say this is what we’d like to track, and this is what we’d like to use it for. Tell us what you’re OK with us tracking, and tell us what you’re OK with us using. That’s not an easy dialogue to have today, in the sense that we get a little techno-weenie sometimes—cookie this and cookie that. Some of this gets beyond the ability of the average consumer to understand.

How important is it to give consumers some type of control over the advertising they see?

I think some users will care a lot and that will be important. … I certainly can anticipate some people saying, ‘I don’t want anybody to read my mail.’ Therefore, you can’t target based on what’s inside the e-mail message. That user might get a little different type of economics.

How do you respond to those who have said Google has out-innovated Microsoft?

We’re moving very quickly, and I feel good about that. I think we have to assemble some of the innovations we’ve put into the market in a unique way that allows them to break through and really grab people. A lot of what will happen will be through the great breakthrough synthesis of some of these technologies. And we have a lot of communicating to do. The day we can categorically say—and there will be such a day—that we have the best search engine in the world, we still have a lot of communicating to do.