Steve Ballmer: Paris Press Conference

Remarks by Steve Ballmer, Chief Executive Officer of Microsoft
Media Agencies Conference
Microsoft Campus
Paris
October 6, 2009

STEVE BALLMER: Well, thanks. It’s a great honor and privilege for me to have a chance to be here with you today. In the car on the way over I have to say I turned to my colleagues and said, 8:20 in the morning is perhaps a little early in the media business, isn’t it? (Laughter.) It’s actually quite early in the IT business also. So, I owe you great thanks for being here, for your business, and particularly for being here so early in the morning. We appreciate it.

Last time I was in Europe was in June for the Cannes Lions Festival, and had a chance to talk some about advertising and online, and in a sense give a perspective on where we see the future going for both advertising and media, because I think having a perspective that is broad and encompasses both is extremely important.

And I want to share some of that same perspective with you today, talk a little bit about what Microsoft’s trying to do to enable that future, both for advertisers and for media companies, and then have a chance to talk a little bit and hear what’s on your minds, questions, comments, thoughts and problems.

The challenges of advertising today simply continue to multiply. I’ve only actually worked one other company in my life other than Microsoft. I was in marketing and advertising at Proctor & Gamble for about 18 months right out of school. I can’t say that makes me a deeply trained advertising and marketing person, but at least around Microsoft I pretend that’s my expertise.

Certainly the environment in which we all do our jobs has really continued to multiply and change. In today’s world how do you build brand, how do you build sales, how do you build buzz? I’ll talk about buzz in a minute.

I think a lot of the dialogues that we have with many marketers really do focus in on brand building and particularly in these days how do you do something effective in brand building in the online space, and I know Olivier and his team spend a lot of time talking with you about some of the opportunities that we think we have created through our MSN and Windows Live strategies here in France.

Sales: I think this is a place where people are willing to concede that online can be quite effective. Particularly people point to search, to other direct response and performance-based vehicles online. Of course, you’re never quite sure what caused the sale to occur, but probably the last thing any customer does before they buy is to do a search, whether that’s why they chose to buy or whether it was an earlier interaction or a brand build.

The third thing I’m not sure what to call, but I’m now speaking for me as a marketer. For me as a marketer the most important thing we’re going to do is build buzz, get people talking about what we’re doing.

And 20 years ago, I would have said it was primarily a PR activity, getting word of mouth, getting interest, and it had brand building characteristics and sometimes it led to sales. But in the world of the Internet today in a sense even that has changed. How we build buzz is quite different.

Today, if I just compare over the last 10 years, the number of media involved in the IT industry has changed dramatically. And when we want to build buzz around a new Microsoft product, a lot of what we need to do isn’t so much brand and it isn’t so much sales; it’s having some kind of direct dialogue with the customer that gets them involved, that gets them interested, that gets them curious, that gets the buzz going, and it’s almost from our perspective a new marketing type.

And I’ll tell you as we approach the launch of our most significant consumer product, Windows 7, later this month, a lot of the dialogue we’re having as marketers is about buzz.

Of course, we all understand that the range and sort of forms of media have changed fairly dramatically. The way people spend their time continues to evolve. The tolerance that users have for putting up with interruptions in what they think of as their life and their experience changes dramatically.

I have a favorite TV program, Lost. If I watch Lost on TV in the United States, I see 16 minutes of commercials for 44 minutes of content, and I’m happy. (Laughter.) If I watch Lost on www.ABC.com, I’m very frustrated with the four 30-second, so the two minutes of commercials that are forced on me on my laptop in the 44 minutes, knowing full well I can just do a context switch and do e-mail during each of those 30-second breaks.

So, we have to really think through the evolution of media, where are things going, where is content going, and what does it mean to all of us as marketers.

And I think the jobs that we are signed up to do will continue to evolve in some fairly dramatic ways. How do you make relevant and interesting content in the right place at the right time to generate sales, to build brand, to drive buzz: all very important issues.

Advertising is a form of content, and so before we talk about advertising, the most important thing to talk about is what’s going to happen with the content itself. What will the content look like? How will we think about it? Because we all have to work to deliver advertising messages that make sense in context.

Well, content is going to be completely different over the next five or 10 years versus what it looks like today. All content will be digital. I don’t think this is controversial in this room, but it’s controversial many places. I really don’t believe in newspapers, I don’t believe in magazines; I believe everything – it doesn’t mean I don’t believe in journalism, it doesn’t mean I don’t believe in entertainment, but I think everything is going to move to be delivered digitally. OK, it might not be five years, it might be 10 years or it might be 12 years, but we’re on the path, we’re on the journey, and it does affect the way we create content.

It also means that all content is going to be social and interactive. You won’t expect some kind of passive experience. You will expect to be able to engage and interact in whatever way is appropriate with friends, with colleagues, and the like.

All content is going to be integrated. Isn’t it sort of funny today, depending on how you print something or how often you print it, it gets called a newspaper or a magazine. Online all content will be regularly updated, it will have text, it will have pictures, it will have moving images in it; we won’t be able to distinguish content types in anywhere near the segmented way that we do today.

All content will be personally relevant. People will simply not engage with that which is not that interesting. And given that we’re going to have literally millions of additional content producers in the world, millions – millions of additional content producers, people will be able to insist on relevance.

You say, what is this millions of additional content producers? Well, I’ll give you my own personal example; you’ll find your own. My favorite new content in the world is www.watchgamefilm.com. It’s the video of all of my little son’s American football games. I can watch them all online today. I don’t have to record them. They are professionally produced. There’s a very nice UI. I can start and stop the game, almost like a professional football game.

But you say, OK, well, that’s cute, Steve, but is that really relevant, and I think the answer is it is relevant. It says there will be more and more of this very personally relevant content, and it puts more and more burden on all of us involved with professional content.

You know, in a sense all of the tools of the Internet will allow a much broader tail of content, a cottage industry of content, which will continue to siphon away the time that people spend online.

And last but not least, content will be multi-device. People will expect to get important or interesting content on a big screen – we can call that a TV if you like – a medium sized screen – that’s where the center of the content industry is online today, that’s called a PC – or a small screen, which I think everybody agrees will be a very high volume device, which today we think of as a phone.

And so in that world we have to say, how do we deliver advertising that’s important, that’s relevant, that fits in the context. Who are the customers? What are they doing? Where are they? What device are they using? Why are they looking at what they’re looking at? We need relevance, relevance, relevance to the advertising, relevance to the content.

We talk about Bing in this context, because one of the questions we ask ourselves is, how do we take the core relevance engine that’s behind search and apply it to delivering advertising content, relevant material in all forms, whether the consumer has explicitly requested it or not. And that’s I think one of the big technological opportunities that’s opened us, for example, to differentiate, taking this amazing core corpus of technology that understands what’s relevant to the user and serves it up even when the customer hasn’t asked for it.

We’re bringing Bing here in France. We are, I will say, coming off of a very low base. Everybody in France except Google is coming off a very low base. The same is true for us in the United States. We have formed a very, very good team. We see incredible opportunities to innovate.

I think when we look back five years, 10 years from now, the world of search is going to feel very different. I mean, if you stop and think about it, the UI for search hasn’t changed in years. And yet there will be innovation, and we think that innovation gives us an opportunity, gives us possibilities.

Certainly there’s great challenges and perhaps the easiest thing to do — certainly from our shareholders’ perspective the easiest thing to do would simply be not to compete. But we’re so excited about the technology, we’re so excited about the opportunity, the chance to innovate, the chance to make a difference, and we are as a company perhaps more determined, more tenacious, more patient — and more impatient than almost any other company out there.

So, we’re going to try to make a difference and provide good competition, the kind of competition that I think will be helpful.

People like to tease me that in some categories we need good competition. In this category we are going to try to give a little good competition to a very strong market leader.

France is one of our early target countries. We don’t have all of our formula worked out, so we’re learning, we’re figuring things out in France, in the UK, in the U.S., three of the perhaps leadership countries for us, and we’ll ask for your support, your indulgence, but we’re going to really invest and try to get this really right for the French market.

Part of what all of you will need to do and all of us will need to work with you on is how do we tell stories, how do we let you tell stories to your customers across these three devices that I talk about: a world of phone, a world of PC, a world of TV? What do things look like in the future?

Eric Boustouller, who runs our team here in France, and I were speaking in the car on the way over. What will interactive television really look like? What’s the technology that will power it? How will we connect? Will it be a next generation set-top box? Will it be intelligence built into the TV itself? Will it be a PC in the house that somehow is used to give you the Internet and give you interactivity on that big screen?

But that certainly has been the primary vehicle for storytelling for many of us in the marketing and advertising business over the last few years. And it’s almost most easy to see how you tell stories on that big, immersive screen.

The user interfaces are going to evolve and change. Some of you may have seen the clips from this technology we demonstrated for Xbox called Natal. It’s a camera that sits over the TV, and if I wanted to advance the slide, I’d go like this and the camera would say, Steve, do you want me to move forward? It sees me, it looks at me, it knows what I’m up to. You want to change the channel, whoosh, you gesture like this, and it will flip right through the channels that are available to you.

So, there are ways to see that staying or maybe even becoming more interactive, more rich, building on the base that I think we all understand. And yet the amount of time that people — and having the whole Internet at your fingertips, the whole Internet there for the user, the whole Internet there for the advertising.

What does that look like on the PC, and particularly I think the big open questions today is, what does that look like on the phone? What will advertising look like on a small device, very personal, where people are really very close-minded about being interrupted? And I think we all like to talk about the mobile Internet, it’s a very important thing to explore, and yet I don’t think we should rush to abuse our customers until we really have a model that works in terms of delivering the right message in the right relevant way. Yes, we know where the user is, but if you actually say we’re just going to keep throwing, have you seen the pizza place, have you seen the running shoe store that you’re walking by, I think we could very quickly cause a backlash from the consumers which would be long term undesirable.

One of the things that I think is most frustrating today for many advertisers is how do we think about measuring and accountability in the Internet space. People tend to be binary. On TV there’s a sense of how to build brand. We as a company actually have increased our TV advertising spend over the last several years, and despite the fact that I’m never sure whether we’re selling anything, I’m quite sure whether we’re building our brand. Very good market research, very disciplined, the media buying is very precise. It builds a confidence in me as a CEO.

On the Internet people can say we got this many clicks. And the truth is we need to get the advantage of both of those analytic types in the online world: unified planning, reporting, analytics.

My sense is – and our team is very good and they’ll talk to you about the opportunities on MSN and Windows Live and increasingly they’ll talk to you about opportunities on Bing, but the truth of the matter is for most of you what you need to do is also be able to buy the Internet at large, because the Internet is so fractured that we may sell you a couple of head properties and perhaps a few others will, but what you really want to do is be able to buy that whole audience, all of those experiences, and one of the core areas of investment for us as a company is in really unifying our display and our search advertising platforms, and having a syndicated approach that allows third parties to take our ads on a variety of sites.

Certainly Google has some opportunities to lead because of the position that they have in search, but I think it just doubly emphasizes the importance of us providing some good competition, so that there really are a couple of us competing to provide you the tools and technologies that allow you to buy the Internet in the large, which is I think increasingly where the pressure is going to be.

I talked a little bit about our Xbox camera. These are two people playing football in front of their new interactive content experience. You can see the avatars that represent them on the left, and frankly nothing in their hands. They’ll sit there, kick the ball. Pardon me if that was a poor form on my kick. It’s not my expertise. But these people will play, they’ll interact, they’ll socialize. The content, the interactivity, in some senses you’re better able to see the future of what’s going to happen here using the gaming technologies than many others.

For all of this to happen requires great partnerships: advertising companies, advertising agencies, media companies, marketers, technology companies, telecom companies, consumer electronics companies and the like.

Our company is making perhaps the broadest set of investments in this area, and seek to partner with you in a broad set of ways. We provide tools, tools for media buying, tools for content development, tools for specialized experience development in Bing itself.

We are a publisher. We work with you a lot on MSN and Windows Live, Bing, Xbox.

We are an advertiser ourselves, and we are working with you as advertisers and advertising agencies who are very important in this overall ecosystem.

I think we can have the broad dialogue with you. We have a broad set of tools that we bring to the equation. We’re very focused, we’re very determined, we’re very committed, and if you take a look at the numbers today, I think we have, I don’t know, 22 million people spending four hours a day with us online, which is very, very effective, and we think we have a lot of opportunities to really help you drive your interactions with your customer base.

So, with that, I want to have a chance to conclude. I’ll look forward to our question and answer discussion session. If there are things on your mind that we’re not able to get to in the discussion with Eric Ravelle, my e-mail address is SteveB@microsoft.com. I’d love to hear from you after the fact as well. Thank you. (Applause.)

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