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Ballmer: Advertising Is All About Content

Microsoft's CEO Steve Ballmer presented an overview of his vision for the future of advertising to a gathering of global advertising professionals meeting on the French Riviera.

His message laid out Microsoft's (NASDAQ: MSFT) vision of advertising in the future -- and it's not just about moving media from paper or television to online.

It also, among other things, depends on technology evolution such as the merging of computing and television. Additionally, though, it also means that the worlds of commerce and advertising need to be re-imagined.

"Five years ago, I'd have said we are mostly trying to do the offline world online," Ballmer said.

Ballmer made the statements during his keynote speech to attendees at the Cannes Lions International Advertising Festival 2009 in Cannes, France, on Wednesday.

His speech comes as the company's newly launched Bing.com search engine tries to compete with rivals Google (NASDAQ: GOOG) and Yahoo (NASDAQ: YHOO) better than its predecessors, Live Search and MSN Search.

The ultimate prize -- money from advertising. Although search advertising is crucial, however, so is figuring out how to deal with the continuing merger of television -- talk about an advertising vehicle -- with computing.

"TV is probably where the development or the future of what's going to happen to interactive digital content is least clear," Ballmer said, envisioning hybrid devices like Microsoft's Xbox 360 game console and media hub, or wireless devices.

"At the end of the day you can put a PC, some form of a PC ... next to the TV or embedded in the TV and we&'ll have to, as we're repackaging the Internet and the digital content for the phone, we're going to see content get repackaged and repurposed to really make sense of a TV-based experience," Ballmer continued.

Ballmer's "Mister Obvious" approach may have been calming for his audience, confronted with rapidly changing business models and explosions in communications technologies, as advertising tries to bridge the gap between the physical and online worlds.

Nonetheless, over time all media will move to digital form and most paper publications will migrate online or die, he said.

"We ought to be able to drive everybody to consume the communications and information, the information in their world digitally. All information will be social, you'll expect to be able to collaborate and share thoughts, perspectives and interactions in any piece of content or any experience socially," he added.

Of course, Microsoft has its own agenda for online advertising as it tries to evolve its business to embrace services "in the cloud," much of which will be Subsidized by advertising.

To that end, over the past several years, Microsoft has spent lavishly -- both internally and through acquisitions -- to make itself a credible presence in online advertising, with some success.

"Microsoft has now grown an advertising business in excess of $2 billion and that's a big number for our company, a big number, and we're very serious about it," Ballmer said.

The company's largest single acquisition was the purchase of online advertising powerhouse aQuantive for $6 billion in 2007.

That media buy has helped Microsoft's play for a larger chunk of the online advertising pie. In the first nine months of Microsoft's fiscal 2009, which ends June 30, the company brought in $1.7 billion in online advertising despite the recession, according to its latest 10Q, That's not a small amount for a company that grossed $60 billion last fiscal year.

Nod to Apple

Much of Microsoft's future advertising earnings will depend on its Azure cloud computing platform, meant to deliver services to users wherever they are and whatever device they're using.

Microsoft launched Azure with much fanfare last fall. However, the service is still in beta and the company still has not explained how it will make money -- though advertising will surely play a large role.

Ballmer also gave a nod to Apple for creating its App Store, a model that Microsoft followed when it introduced its own Windows Marketplace for Mobile earlier this year.

"[I] give a lot of credit to Apple and what they've done with the App Store ... people are trying to figure out how to take the PC-based Internet and repackage it for a small screen," he added.

He wasn't quite so generous when it came to mobile devices.

"Microsoft will continue to push forward with our Windows Mobile program, which despite the fact that we've certainly seen a little momentum in our competitors this year; we think the notion that there's a software platform that can be available on many hardware devices, is key to platform standardization on the phone."