If Microsoft has its way, you’ll soon be Skyping on your Windows Phone with 500 of your closest Facebook friends about the latest daily deals in your city. Then you’ll find those local businesses through Bing, which will help you decide which ones to pursue—and will help both merchants and consumers cash in on those local deals.
OK, that’s not quite how Qi Lu described it, but I’m reading between the lines here, so cut me some slack.
Lu, Microsoft’s president of online services, delivered a wide-ranging talk last Wednesday at the firm’s New England Research and Development Center in Cambridge, MA. He put forth a sweeping and ambitious vision for how Microsoft plans to create the future of the Web, amid the rise of fast communications (Twitter), social networking (Facebook), local deals (Groupon), search capabilities (Google and Bing), and mobile app stores (Apple).
Create the future? That’s right—even though Microsoft is still a business software firm that makes most of its money from things like Windows, Office, and SharePoint, it has been making big investments in the consumer Web for years, with efforts like its MSN portal, Xbox Live online gaming service, and Bing search engine. The future of the company is online, and it’s time to start looking for a new customer base—and a payoff. In fact, two years after the Bing rollout, it might be now or never for the Redmond, WA, tech icon (NASDAQ: [[ticker:MSFT]]).
“The opportunity to innovate is truly vast,” Lu said in his talk. Later, he added, “The Web has far outgrown its heritage. It’s a full-blown digital society.”
Lu, for those who don’t know, was brought in by CEO Steve Ballmer in late 2008, after a decade at Yahoo, to revitalize Microsoft’s online efforts in everything from search and advertising to Web software, services, and infrastructure. So, yes, Xconomy talked with him in private about Microsoft’s $8.5 billion acquisition of Skype (which everyone was interested in hearing about last week). But that wasn’t the focus of his talk, or our interview (which follows below).
I’m not going to summarize Lu’s presentation here—that would not do it justice. But here are three nuggets that stood out to me (as well as my interpretations and speculations), having listened to talks about Microsoft’s online strategy for several years now. Collectively they scream, “Look out, Google,” though not in the ways you would have expected maybe a year or two ago:
—Microsoft is about to dive into local deals. The meteoric rise of Groupon took all the tech giants by surprise, so it was just a matter of time before Microsoft made a big move in this sector. Lu said that while Google is built around half a million businesses (advertisers), Groupon is built around “the next 10 million businesses trying to reach customers digitally.” He didn’t say exactly what Microsoft is planning in deals, but he noted that the sector “taps into unfulfilled capacity” from businesses with relatively fixed costs, and that it “fuels new technology development.” What’s more, he said the deals sector “isn’t about one company” (he cited about a thousand Groupon copycats in China). So look out, Groupon.
—Facebook is key to Microsoft’s future on the Web. Whether he meant to or not, Lu tied Microsoft’s social strategy pretty tightly to its partnership with Mark Zuckerberg’s company. He called social media a “tidal wave” that is changing the structure of the Web. He hinted that social recommendations from trusted people in your network could become an important source of how Microsoft (presumably Bing) helps people make decisions in “a digital version of the world.” So look out, Facebook (which already has its own ideas about translating social recommendations into advertising revenue).
—Connecting mobile apps is a big opportunity. As more software moves from PCs to app stores and mobile devices, Lu said that connecting these apps represents a great chance for Microsoft “to take a leadership role” in online services. Whether he meant creating a new kind of app search engine, or a platform for combining and unifying apps on your (Windows) phone, I wasn’t sure. But he talked about how managing apps better could “enrich any human activities.” Look out, Apple.
Indeed, perhaps what’s most striking is how quickly search and the Web—and all the tech giants playing in the sector—have evolved in the two and a half years since Lu was recruited to join Microsoft. In particular, search has gone from being mostly a standalone source of ad revenue to a “gateway” to online services, he said, and it “occupies a unique place in the consumer value chain.”
We wanted to get a sense of how things are going in that ever-changing maelstrom. So, before his public talk, Lu sat down with Xconomy’s Bob Buderi and me for an exclusive interview. Here’s an edited transcript of our Q&A:
Xconomy: Let’s start with some of your personal and career experience. What are some unifying themes and lessons that you have brought to Microsoft?
Qi Lu: I can share a couple things that come to my mind. [One is] a more internalized
