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Inside Microsoft's War Against Google

Business Week takes on Microsoft's future and comes to the same conclusion I have. It's all about cloud computing:

Before yanking the Yahoo offer, [Microsoft CEO Steve Ballmer] had begun laying the groundwork for a strategy to compete with Google in online advertising. He's convinced that getting the online ad business right is essential to Microsoft's future. The reason: Consumers and businesses increasingly are switching from desktop software like Microsoft's to free online services that do the same things. "We are absolutely committed to be the leading player in that endeavor," Ballmer told employees at a recent gathering.

It may be impossible to catch Google in search advertising ... But Microsoft has a fighting chance on several other fronts. Perhaps most important is display advertising, the colorful banner and video ads that run at the top or along the side of Web pages.

It's hard to overstate how important it is for the company to master online advertising. While Microsoft is phenomenally profitable today, adding $1 billion each month to the cash hoard from its lucrative software business, it faces a serious long-term threat. The company's fortunes have been built on software that runs on PCs, especially its Windows operating system and its Office word-processing, spreadsheet, and e-mail programs. But that kind of software is beginning to shift online. People with pretty much any kind of computer can go to the Web and use applications for things like word processing and communication. The programs are typically available for free.

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