• Business Week, Wednesday, October 3, 2007 10:45 AM

Thirty-two year old Microsoft Corp. has been a software company for most of its life, but media is its future, CEO Steve Ballmer said at a media event in Paris on Tuesday. As growth in operating system and desktop software slows, Microsoft expects that within four to 10 years, 25% of its revenues will come from advertising.

Part of the reason for the change is the growth of free, ad-supported Web services offered by Google; consumers no longer need desktop software to write documents and create spreadsheets, which has left the technology giant searching for new sources of revenue. The other reason is opportunity: "All marketing will be digital sometime in the next 10 years," said Ballmer.

The Microsoft of the future will be a triumvirate of software, ad serving and media content. Thanks to its $6 billion acquisition of aQuantive, the company has become an instant player in ad delivery and marketing services. Other acquisitions, like the in-game advertising company Massive, give Microsoft the ability to deliver ads in media its competitors cannot reach. Mobile advertising, too, figures to be a huge area of expansion for the software giant, which continues to go toe to toe with Google.

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