Microsoft boss hints on future MSN search innovations and the future of MSN and Live Search.

The keynote conversation of the Search Engine Strategies conference in New York was between conference host Danny Sullivan and Steve Berkowitz, Senior Vice President of Microsoft’s Online Services Group. This group includes MSN and Windows Live.

Last year Berkowitz was CEO of the search engine Ask. He himself compared the switch to Microsoft to a shift from steering a row boat to a cruise ship. A cruise ship is much harder to turn.

The conversation between Berkowitz and Sullivan took place in a friendly atmosphere, without too provocative questions. That being said, Berkowitz did make some interesting comments.

The hidden innovations of Microsoft

Berkowitz was very eager to talk about the creativity and innovative spirit of Microsoft. After having worked for Microsoft for some 11 months, he said that he was very impressed with the ideas, talents and products found in the company.

However, by saying this, he also indirectly admitted that Microsoft hadn’t always been equally good at making use of all this innovation. The term he used was “unlocking the potential� of these ideas.

One underexposed application was Microsoft’s local application for mobile phones. He told the audience how he could get traffic reports for New York or restaurant information on his cell in his. The Seadragon technology helps Windows Live applications download huge amounts of data and deal with images.

“We must learn how to bring ideas and product to the market in a more innovative way,� he said, “as well as focus on the basic, the core.�

The core: search and advertising

To this core he counted navigation, understood as search, as well as the advertiser. Berkowitz wants to look at “the whole ecosystem of this business�, and how to share value in that system.

He argued that search and advertising have to be understood as one phenomenon. “The ad platform and search is reverse engineering of each other,� he said. Advertisers want to deliver the right ad and Microsoft must understand the content of the page. The relevancy of the page in total is also the main point of search: “It is all about delivering the most relevant page.�

The power of Berkowitz

Sullivan wondered how Berkowitz himself can influence the product. Berkowitz’ answer was vague: “It is a collaborate effort,� he said, and argued that it all is about understanding what the customer wants: “It isn’t about structure or who reports to whom.�

MSN versus Live

Sullivan has for a long time been sceptical to Microsoft’s use of two brands for search: Windows Live and MSN. He asked Berkowitz whether he thought Live was the right brand.

“The idea is that we will become agnostic to your devices, from a standalone PC to a network,� Berkowitz argued. “Windows Live is to extend what Windows is. You should be able to use your Windows ID and take it where you go.� In other words: Windows Live is to become the extension of Windows onto the Internet.

It was interesting to hear Berkowitz preach the Google gospel of platform independent ubiquitous computing. “We are moving from your server in the office to the clouds,� echoing Google’s strategy of moving storage online.

Berkowitz’ argument was to help people gain access to their address book, search history etc. wherever they go. Windows Live is to be combined with Office Live for small businesses.

Berkowitz wasn’t equally clear on the branding issue, but indicated that one solution would be to brand Microsoft Search as “MSN powered by Windows Live�. Both brands will clearly continue to exists, but – as he said – “we must give them clarity�.

As for the development of MSN, Berkowitz told the audience that they will include much more social content and current events.

Improving MSN’s position

Sullivan wondered whether it was satisfactory for Microsoft to be number three in search. What could the company do to improve the situation?

Berkowitz did not deny that Microsoft’s position in this marked is less than satisfactory:

“The first goal is to reach critical mass from an advertiser perspective,â€? he said. “Search will continue to evolve. There is destination driven search (Live.com) and then there is convenient search — integrated into mail, messenger etc.; you search ’cause you are there.â€?

The future will be about where you take the experience of search, he argued: “You will want to know what your friends search for. I see that Microsoft has the ability to find new ways of delivering that info. There is no ‘one size fits all’ solution.â€?

The value chain

Sullivan asked whether Microsoft would abandon the “if you control the operating system you control the browser philosophy�.

“The value chain exists today,� Berkowitz said, “from the OS (operating system) to the OEM (original equipment manufacturer) and the ISP (Internet service provider. There is no leverage of owning an operating system today.�

In other words, Berkowitz indicated that the company will focus more on developing good products in the same way as everyone else.

Still, he also complained that other suppliers made the Windows experience more complex for users: “I want the consumer to be pissed off if someone forces this [certain applications and functions] on them. You get all these pop ups and you don’t know how to shut it of. We [Microsoft] didn’t do this to you!�

The new strategy is not about leveraging Windows software wise. “We have to earn it [i.e. success]. We want to become the best developer shop for building on top of the Windows platform, as everybody else. “But we will extend the brand value of Windows and extend the paradigm of Windows.” He used the paradigm of sharing folders as an example.

Ms. Dewy interrupts

At soon as Sullivan had asked about a possible Microsoft Yahoo! takeover, Berkowitz was saved by no other than the obnoxious Ms. Dewey, the avatar of Microsoft’s experimental search engine.

Ms. Dewy (or – rather – the actress Janina Gavankar) was more interested in the future of Ms. Dewey and proposed that Ms. Dewey goes to Paris or Panama even. She admitted that this was not very likely, though.

She then started flirting with Berkowitz: “You look very leadery!�

“We love you, Ms. Dewey,� Berkowitz replied and told the audience that Ms. Dewey had been very successful as a marketing product. He asked the Ms. if he could call her Dewey.

The response: “You can call me Ms. Dewey if you’re nasty!� And on her way out: “My, what a bunch of geeks! …Is this mike still on?�

MSN Yahoo! take-over

Sullivan did not forget about the Yahoo! question, though.

Berkowitz replied that he could not comment on a possible MSN takeover of Yahoo!

“We will focus on the audience we have,� he said. “We will leverage the assets we have from Xbox to Office and crack open the vaults of our labs.�

“We had an executive retreat two weeks ago, where I spent five hours that night listening to different ideas… You realize that this company has so much innovation and so much talent, but we have not been good at makeing ourselves look cool. We must be bold enough to bring these technologies to the forefront.�

As for what these amazing technologies are, he wouldn’t go into detail. He did mention a “playtop desktop search�, though.

He also said that he expected search to move from a text based interface to a graphical interface. “This will be interesting on the advertising side,� he said and pointed to the use of rich media. He believed search will be very different three to four years from now.

When asked to compare Microsoft with Yahoo! and Google he answered diplomatically (which he has to do as a company executive) and focused on Microsoft own advantages:

Microsoft has a great audience and advantages of scale and reach, maturity and diversified business models. The size of Microsoft makes it possible for the company to invest much in storage as well as long term research, he argued, and that will be very important in the future. “And the investments will be huge.�

In the Q&A Berkowitz promised to encourage Microsoft bloggers to interact more actively with users.

Short comments

At the end Sullivan asked Berkowitz to give very short responses to particular keyword. This is the exchange:

DS: “Google�
SB: “Amazing�

DS: “Yahoo!�
SB: “Working hard.�

DS: “AOL�
SB: “Trying to hold its own.�

DS: “Ask�
SB: “Love it!�

DS: “Microsoft�
BS: “Potential�

DS: “Steve Berkowitz�
SB: “Having fun!�

More of Pandia’s Search Engine Strategies coverage.