Microsoft is attempting to break into online advertising, but Ballmer admitted at the Gartner Symposium/ITxpo here Wednesday that Microsoft is still an "aspirant" in the search and advertising fields.
"In world search and advertising, Google is the leader; we're an aspirant," Ballmer said. "We have a lot of work to do in search and advertising."
Microsoft acquired digital-advertising company Aquantive in May, and it has been in the process of investing $2 billion in its own online-advertising platform.
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Ballmer said it is "expensive to do an advertising platform," but he insisted that Microsoft's platform, Microsoft Digital Advertising Solutions, is viable.
"Our advertising system works," Ballmer said. "When we have something there, we'll show you."
The Microsoft chief said the company had evolved from a desktop software enterprise to a business that had "broadened" to include advertising and online services, as well as being an entertainment and mobile-device company.
Ballmer added that Microsoft's "software model is under attack...We need to take control back."
Aquantive itself still needs to use an external advertising agency as consultants, Ballmer admitted. "(Aquantive has) learned a lot from having an advertising agency feeding back," the chief executive said.
Gartner analyst David Smith said Microsoft was "clearly going after the online-advertising market, and advertising is Google's core market."
Smith said the slowing of the software industry's growth "is a challenge to Microsoft," hence its need to diversify into other sectors of the IT industry.
"Open source is putting a lot of pressure on pure-software companies," Smith said. "Microsoft doesn't have presence in other business--it needs pressure in the advertising market."
Tom Espiner of ZDNet UK reported from Orlando, Fla.
