Microsoft "hell-bent" on building ad business

Hefty investments in online services and consumer electronics will let Microsoft maintain its historically rapid growth rate, CEO Steve Ballmer told financial analysts on Thursday.

The largest software company is hosting its Financial Analysts Day at its Redmond, Washington headquarters, where Ballmer described Microsoft's strategy as making several big bets on emerging businesses while drawing more revenue from its mature desktop and server software franchises.

Microsoft is transforming its product development and business models around "software plus services", or software complemented with online services, he said. The company has been criticised by financial analysts for being slow to capitalise on advertising revenue as search giant Google has done.

Ballmer said: "We are hell-bent and determined to allocate the talent, the resources, the money, the innovation to absolutely become a powerhouse in the ad business."

Company founder Bill Gates, who made a presentation before Ballmer, announced that Microsoft is opening a dedicated centre to research online advertising and search called the Internet Services Research Center. Headed by Harry Shum, the centre's research will focus on search relevance, spam prevention and searching scanned images, such as book pages.

Ballmer said that the company is tackling disruptive technology changes head-on, namely the shift to advertising-supported web services. Its commitment to online services and consumer devices are necessary because they provide avenues for the company's software.

Furthering its strategy to court web developers and designers, Microsoft said that by the end of the week it will release Silverlight 1.0 Release Candidate. Silverlight is a download for displaying media and interactive content in web pages. It competes with Flash and other plug-ins that add interactivity to websites.

Martin LaMonica writes for CNET News.com