While speaking at Microsoft's Financial Analyst Day, Steve Ballmer said the company is hell-bent to succeed in the ad business:
Microsoft is transforming its product development and business models around "software plus services," or software complemented with online services, he said. The company has been criticized by financial analysts for being slow to capitalize on advertising revenue as search giant Google has done.
"We are hell-bent and determined to allocate the talent, the resources, the money, the innovation to absolutely become a powerhouse in the ad business," Ballmer said.
Company founder Bill Gates, who made a presentation before Ballmer, announced that Microsoft is opening a dedicated center to research online advertising and search called the Internet Services Research Center. Headed by Harry Shum, the center's research will focus on search relevance, spam prevention and searching scanned images, such as book pages.
Ballmer said that the company is tackling disruptive technology changes head-on, namely the shift to advertising-supported Web services. Its commitment to online services and consumer devices are necessary because they provide avenues for the company's software.
He defended continued investments in two unprofitable divisions: Online Services and its Entertainment and Devices division. Microsoft's multiyear commitment in server software for corporate data centers diversified the company and created a multibillion dollar revenue engine.
"We're bringing the same kind of vision and tenacity that is in our DNA that drove us into the enterprise business into consumer devices and online services," Ballmer said. "We are going to be an advertising company, and we are going to be a devices company."