"The online advertising piece is a small piece of the overall advertising pie, but as TV viewing moves to the online space, the idea of targeting ads becomes completely a mainstream thing," Gates said. "That's why you're seeing us make investments in that area."
Ballmer went even further, saying that it is "essential" for Microsoft to become an "advertising powerhouse" going forward if it is to succeed in the services world.
Though Microsoft is still third in the online advertising race, it has signed deals with Facebook and Digg, just yesterday with the latter, and has invested heavily, as Gates said, in IPTV technologies. It also recently applied for a patent for an advertising platform that would use information found on a computer, rather than just the Web, to determine context and deliver ads.