Ballmer's formula: Patience and innovation

During an interview with Elevation Partners' Roger McNamee,  Microsoft CEO Steve Ballmer cited Microsoft's well known "tenacity, persistence, patience and willingness to stay after it" as the way the company will thrive in the Web world, led by companies like Google and Yahoo. "We will show our usual innovation and patience, which distinguishes us from many other tech companies." It helps to have mega-billions to spend and 30 years of battlefield experience, too...

Ballmer said that Microsoft is very focused on building out its ecosystem for the advertising model, but didn't give any timetable as to when he thought his company would move from number three (behind Google and Yahoo) to number two or one. "You won't see an overnight transformation...it will be a longer term thing," Ballmer said.

In terms of getting traction, build inventory for its new adCenter platform in the ad market, Ballmer identified three priorities--investing in Microsoft 's services, such as the Live services; doing business partnerships and development deals with companies large and small; and from time to time doing acquisition to help bootstrap market for ads.  

"It's fundamental for us and we will build an ecosystem around it like Window," Ballmer said. "The way advertising is bought and sold will be fundamentally different in the future, and the  importance of technology in advertising will go up," he said. adCenter and other ad engines are like an eBay for advertising, he added, in a way that creates value for both the service provider and advertiser and gives consumer ad experiences that are not disruptive, but tailored and additive while respecting user privacy.

"We will have more disruption from technology than other areas that have gotten more attention. In a  sense we are a 'Johnny come lately,' but we really grok what is going on," Ballmer said. To get to critical mass Microsoft has to has apps. Google has search and Microsoft has Hotmail, instant messenger and others to help bootstrap marketplace, he added.

Regarding Google, Ballmer said, "[Google] has a little too much cacophony in their development process. As a guy dealing with engineering at scale for long time, it's important to have lots of flowers blooming for innovation,  but its important  to have some coherence--time will tell."

He challenged the notion that Microsoft is no longer the growth company it was, citing growth in profit. He said that Microsoft had 23 percent of profits of top 25 companies in its industry, up from 18 percent, and a healthy $20 billion in pretax profit. "We are not doing a 20 percent growth deal, but I think that's pretty good.," Ballmer said.

You can listen to the complete podcast here...