Battelle and Ballmer began their duel with Bing: Battelle reminded Ballmer that he had said Bing would one day grow up and surprise us all, and in fact, through Microsoft's partnership with Yahoo, Bing is now the number two player behind Google. Ballmer issued a challenge to the audience, saying to compare the search engines. He's betting that 70 percent of people won't care, 15 percent would like Bing's results, and the other 15 percent would like Google's. His point: Bing has raised its relevance.
Battelle then pressed Ballmer on social, asking whether that market had officially passed Microsoft by, but Ballmer responded: "We picked our play--connectivity to people." In other words, Skype offers a more one-on-one, or personal approach to social. When asked if Google Hangouts was a potential threat to Skype, Ballmer noted Skype's integration with Facebook.
Ballmer and Battelle shared a few laughs about Microsoft's failed attempt to acquire Yahoo years ago for more than $40 billion. "We would have closed that deal just about post-Lehman Brothers," Ballmer without masking the irony; "sometimes...you're lucky."
On the cloud, Ballmer said "all in, baby," adding that in the enterprise "we are winning, winning, winning, winning." When asked to clarify, he said Microsoft was beating Google 98 percent of the time, but narrowed that just to applications in the cloud, saying that market in particular was where customers were more accepting of the cloud.
Platform as a service, Ballmer said, still has a long road ahead. But he said Microsoft is well positioned to capitalize now (through its virtualization technology) and in the future (with Azure).
Ballmer also touted the evolution of Kinect, citing deals Microsoft has signed with National Geographic, Sesame Street, and other companies that would bring new Kinect and Bing-powered experiences to the XBox platform in time for the holiday season. New experiences are also coming--ones that will enable gesture and voice-based search using Kinect.
Finally Ballmer took aim at Google and Apple, first touting the beauty of Windows Phone 7 and Windows 8, but also calling Android an operating system for computer scientists, and perhaps referencing Apple when he talked about products that presented "a sea of icons." He did acknowledge that Microsoft needs to do more to drive down the price of mobile devices.
See more of what Ballmer had to say at Web 2.0: