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Google has given Microsoft something to think about with a seemingly successful advertising-based business model, but Microsoft can "out Google" Google with developers.

That's the enthusiastic view of Microsoft's recently appointed chief technology officer (CTO) Ray Ozzie, who believes Redmond can utilize MSN to beat Google and become the industry's largest beneficiary of online advertising-based services.

Ozzie was speaking ahead of Tuesday's rather disappointing "live software" announcement in San Francisco where Microsoft unveiled the advertising - and subscription - based Windows Live and Office Live.

Microsoft hopes to convert millions of Windows developers using software development tools like Visual Studio into content providers, building adverts and services into Windows Live, Office Live and Windows applications.

Microsoft is not just trying to follow Google, it's also chasing eBay and Amazon.com. These online empires have been releasing their APIs to developers for several years now, with developers building business offerings that integrate back into the main eBay and Amazon platform for exposure and sales.

While Microsoft may have been happy to let eBay and Amazon slide, Google caught Microsoft's attention with its advertising revenue and superior search.

"Google has done an amazing job at proving out the ad-supported model," Ozzie told last week's Vortex05 conference of chief information officers (CIOs), in San Francisco. "We [Microsoft] have to think how we'd monetize that under a different model."

The secret to monetization is - apparently - to translate the concept of the vast data center that Google has built using an infrastructure of commodity PCs (running Google's own Linux) that drives Google search, into the pseudo data center that is the MSN server and client architecture running Windows.

And, the fact MSN is just one of a handful of internet operators who has that size of infrastructure on tap, and because Microsoft "will" beat Google, Ozzie seems to believe it's a foregone conclusion that Microsoft will therefore beat all others to take the lion's share of the market for advertising-based services.

"There will be very few companies who have that scale to build that infrastructure," Ozzie said.

Ozzie joined Microsoft this year in a hire that was vital to the company's efforts to crack the nut of services and peer-to-peer, software-based, networking. Microsoft claims to offer "services" already, through such over-hyped activities as its Dr Watson to report errors in Windows and Xbox live.

Ozzie, creator of IBM's Lotus Notes groupware software, though, was going far further by developing software at his start-up Groove Networks that let individuals work together by securely slipping through firewalls to speed-up the collaborative process. That's got interesting crossover appeal for Microsoft's Office desktop productivity suite.

Microsoft's white-haired new boy says the company will leverage its relationships with enterprises and small businesses, and its footprint among seven million Windows developers to kick-start the ads revenue wheel. "An amazing number of developers use the [Microsoft] tools. I am very, very passionate about how services can be brought to bear to help those people make money," Ozzie said.

As ever, though, Microsoft's problems are scale and applicability of its service. Microsoft is renowned for building personal software that's great for individual or relatively small groups of users, but that struggles at the enterprise level.

Ozzie, for example, foresees problems developing different types of access controls in services that are simultaneously availably in public and private domains. Also, how do you provide search capable of spanning desktops, intranets and the internet - that's something even IBM has been at pains to differentiate between. Relevancy on the internet may be links or track backs while number of emails is a better indication of relevance on an enterprise network.

That's where Microsoft will need to draw on developers to enrich Microsoft's underlying platform or service. "We haven't yet cracked how to integrate what's on the desktop with what's in the various content management systems," Ozzie said.®

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