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Tonight I sat down with Microsoft executives Steve Berkowitz (Senior Vice President, Online Services Group) and Christopher Payne (Corporate Vice President, Live Search) to talk about their new 3D version of Virtual Earth. Microsoft is positioning Virtual Earth as "the beginning of the 3D Web", a quote I heard from Steve Lawler (General Manager, Virtual Earth Business Unit) during the launch event this evening. In my discussion with Steve and Christopher - which was more an informal sit-down than a formal interview - we discussed the ramifications of this 3D push, as well as how visual search is the next big thing in search.

First things first. Here is a quick overview of the product details from Techcrunch:

"US users with Vista-ready Windows computers and IE 6 or 7 will be able to navigate through an aerial view of 15 select cities with enough detail to discern the texture of buildings and read clickable billboards from the likes of Fox, Nissan and John L. Scott Real Estate. Virtual Earth 3D is expected to expand to cover up to 100 cities around the world by the end of next summer. "

Virtual Earth can be used only in IE browsers (no immediate plans for Firefox, in the beta at least), and as part of search results. On that latter point, Microsoft is very keen to "change the game of search" and take it to the next level - in order to trump a certain Mountain View company. But during my conversation with Steve and Christopher, it was clear that they regard this as an evolutionary process and not a revolutionary one. They told me that visual search is the next step in search and Virtual Earth is a good demonstration of where search is headed.

"Why on earth does the world need another search engine?", asks the new Live Search promotional site. In addition to that website, as John Battelle's Searchblog reports, Microsoft has launched a campaign for Live Search with digital and print ads in major newspapers - New York Times, Wall Street Journal, Seattle Times/PI, SF Chronicle, USAPicture 7-5 Today.

The Live Search promotion site also quotes Battelle from his book The Search: "Search is at best 5% solved--we're not even in the double digits of its potential."

That's something that Google no doubt agrees with. Google's execs are regularly quoted as saying search is far from a solved problem. Take this Marissa Mayer quote from a recent InternetWeek article:

'As successful as Google's search engine is, Mayer feels it could be better. "Search is superprimitive," she said. "It's disappointing that it's not advancing as much as we had hoped."'

I imagine 5% is about equal to "superprimitive".

Microsoft has released details of its upcoming Zune product, an iPod-like device that is squarely aimed at challenging Apple's dominance of the online music market. TechCrunch, Engadget and PaidContent have all the details, so I just want to focus on a couple of interesting Internet features of Zune.

1) Zune will have a social network (iPod/iTunes doesn't)

This is clearly going to wake Apple up, because a social networking aspect is the one glaring feature missing from its otherwise excellent iPod/iTunes online music combo. Zune's social networking will be based in Zune Marketplace, the equivalent of iTunes. Songs can also be shared via wireless technology on the Zune device.

It also seems that Zune will have as good a selection of music as iTunes, although details are sketchy at this stage.

2) Zune is centered on connectivity

This is what Microsoft truly believes is its advantage over Apple - ability to connect Zune across a network of devices. Zune will no doubt over time hook into the PC, Xbox, TV, etc. While Apple announced its own inter-connection plans with iTV this week, in this case Apple is the follower and not the leader.

Of course the big advantage Apple has is its brand and design, which a lot of people think is enough to continue its success. And given the early screenshots of Zune, with its brown(!?), black and white colors and its monolith-like shape - well, let's just say that Apple designers won't be feeling the heat any time soon!

Summary: Zune Experience

Microsoft's vision for this is summed up here: "Zune is Microsoft’s music and entertainment platform that provides an end-to-end solution for Connected Entertainment."

It's a social platform, as well as a music one. This currently differentiates it from Apple, so it's a good move by Microsoft. It also promises a very connected experience across devices, which plays to Microsoft's strengths. Whether all this is enough to challenge Apple, which has already won over the hearts of the mass market with the iPod and iTunes, will be interesting to see.

Despite all the broohaha over whether Spaces is the biggest blog service on the planet, it's apparent that Windows Live is making an impact on the Web. After being around for less than a year, Alexa now ranks Live.com (and all its sub-domains) as the 10th biggest property on the Web. And yet it doesn't seem to be affecting MSN.com's traffic that much. MSN is still the 2nd ranked property on the Web, behind Yahoo.com and ahead of Google.

Here is the relative ranking for the live.com sub-domains:

- login.live.com 59%
- mail.live.com 20%
- spaces.live.com 15%
- get.live.com 2%
- live.com 1%
- ideas.live.com 1%
- help.live.com 1%
- Other websites 1%

The login.live.com domain is essentially Microsoft Passport - and note that when you sign into certain MSN properties, it'll re-direct through the login.live.com domain. That goes some way to explain why live.com is doing so well, but not at the expense of msn.com.

Here is the Alexa comparison chart between MSN and Live.com:

The gap is closing, but more due to Live.com's growth rather than MSN losing traffic. However as George Moore, GM for the Windows Live Developer Platform, told me earlier this week - Windows Live rollout is due for completion at the end of this year:

"Well actually you're starting to see a number of the websites losing the beta designation and the trend looks alright. I can't say the specific date when everything's going to be out of beta, but certainly it's going to be this year - ahead of Vista."

So Live.com is well and truly on track to become Microsoft's main Web property. While MSN isn't losing much ground currently, once all the current Live products go out of beta and replace the MSN versions (e.g. Live Mail for Hotmail) - expect Windows Live to take MSN's place at number 2.

At the Microsoft TechEd conference in Auckland on Monday, I got a chance to sit down with George Moore - GM for the Windows Live Developer Platform. He is of course based in Redmond, but was over in NZ for TechEd.

I started off by asking George about the "largest blogging service on the planet" quote from his presentation that morning, in reference to Live Spaces. Ex-Microsoft blogger Robert Scoble had taken issue with it and the story ended up number 1 on Techmeme. George said it was a "tempest in a teapot" and that the more important point is the relative amount of growth of photos on Spaces - 5 million photos being added each day. I prodded a little to see if he knew Google's blogger.com numbers, but he didn't. In any case, if you want to see George's quote in full context at TechEd in Auckland, it's available on video.

Here is an edited transcript of the rest of the interview...

RICHARD: Talking about general stats, this morning you gave some very impressive numbers about Windows Live. They indicate that the Live platform has already gained a significant user base (much of it from previous MSN-branded services). A lot of the Live products are still in beta though (e.g. Mail, Shopping, live.com itself). So where would you say Windows Live is at currently in terms of product rollouts - will things start to come out of beta when Vista is launched, for example?

GEORGE: Well actually you're starting to see a number of the websites losing the beta designation and the trend looks alright. I can't say the specific date when everything's going to be out of beta, but certainly it's going to be this year - ahead of Vista.

RICHARD: Gadgets, or mini applications, are becoming increasingly important on the Web - they can be added to personalized start pages (like live.com), to social networks (MySpace is a popular platform for mini-apps), and even in normal blogs/webpages. You also showed one today that was integrated with Windows Live Mail...

GEORGE: The Live Mail example was to illustrate the gadget architecture. In fact Windows Live Mail is built on the same gadget architecture, as is Spaces. So the basic kernal pieces are identical and used and reused across the Windows Live services. The important point is not that we're asking developers to go out and build gadgets because we think it's a good idea. We're self-hosting them ourselves - actually building our own services out of that same architecture. We're dog-fooding those pieces and we're achieving fairly massive amounts of scale using the same architecture.

RICHARD: Perhaps the most exiting part about gadgets is when future technologies start hosting gadgets - Xbox, mobile phones, television/Media Center. Can you tell us a bit more about the larger, future, vision for gadgets for MS?

GEORGE: It really depends upon the capabilities of the browser. I mean obviously you're not going to run gadgets as they exist today with Ajax inside. In mobile alone that's going to lack a significant Javascript interpreter and the xhtml request pieces and all those components. So in many cases it's dependent more on the capabilities in the underlying browser. In the case of Windows Media Center, you're running IE at that point - so there's no reason why you couldn't run a gadget in that case anyway. It'd be a ten foot UI experience as opposed to a two foot experience. But architecturally there's nothing different because you're just running on top of IE.

RICHARD: So that's part of your vision, to have gadgets running on all sorts of devices - not just the PC...

GEORGE: Well certainly having the user have access to their content from any number of different devices, is certainly part of the vision. We've been talking about that for almost a year now. The technological means of how that data is rendered will be dependent on the underlying capabilities of the device and where the device is predominantly used - and ten foot vs two foot UIs in mobiles and intermittedly connected vs always connected... that sort of thing. And that goes hand in hand anyway with the Live Anywhere vision around the gaming - and all those pieces as well. 

RICHARD: Is a lot of that outside Microsoft's control - in that it needs other parts of the infrastructure to come together. For example with mobile phones, the platform isn't quite ready yet.

GEORGE: For traditional mobile phones, yes. I mean you have fairly anemic browsers in those mobile phones today, but for Windows Mobile phones increasingly you'll see more capabilities being added into the browser. But that's just the normal evolution of things, that devices get smarter, more transisters, making use of the transisters, that sort of thing. 

RICHARD: The Vista Sidebar is an interesting development. As Vista hasn't yet been released, most people probably don't fully understand how Windows Live and gadgets will interact with Vista and the sidebar. I wonder if you could walk us through the high level of how that Web/desktop integration will work once Vista is released? 

GEORGE: The gadget architecture can actually render to any number of different technologies. It can render to DHTML, to Avalon, etc. So it would be up to the gadget author to detect if they're running on a Vista machine, if they choose. They could just write a standard straight-up vanilla gadget that renders to dhtml - and it would work on live.com and Vista sidebar. However they could detect the fact it's running on Vista and say: I'm on a more capable machine, I want to do something fancy with Avalon, some translucent GUI effects or whatever it is - or I'd like to be smart about being intermittedly connected... so it's really up to the imagination of the gadget author as to how far they want to push the boundaries, of leveraging the underlying hardware on the platform.

RICHARD: So the sidebar is quite a key element of vista - it seems like it's being positioned as a crucial intermediary between the Web and the desktop. Is that correct?

GEORGE: Well it's a handy docking space for people to be able to have ready access to bite-sized bits of information. That's the whole vision around the gadgets anyway. 

RICHARD: What are the most innovative Windows Live products in your opinion currently? I know it's early days, but are there one or two products that you think point to the future and are really innovative in nature. E.g. you mentioned Messenger Bots this morning, which are like automated agents. That seems pretty innovative to me, but I wanted to get your pointers on other interesting Live products/apps worth keeping an eye on. 

GEORGE: Well certainly the increased capabilities of running gadgets in Spaces, as Spaces continues to evolve and grow in that sense. It's interesting to think about Messenger and being able to de-compose parts of the Messenger experience. So things like the chat window itself is logically separate from presence, which is logically separate from the contacts, and things like that. So I think you're starting to see a generalised trend that this componentization metaphor is essentially de-composition of things like Messenger into its component hostable parts. 

The first example of this is the Contacts gadget, where we're essentially taking out the contacts information on Messenger and enabling it to be hosted standalone on a site. So when you say innovative features, you really have to differentiate between the finished services that we provide - Mail, Messenger and Spaces - and what capabilities we can provide for APIs inside vs the infrastructure pieces. The underlying pieces around why the Contacts gadget, for example, runs independent of Messenger and doesn't require the Messenger client to be installed on the user's machine. 

We want to provide this a la carte, you choose whatever APIs you want and push together - that's just how Windows itself bootstrapped. Because we can never predict [what people want] in various geographies worldwide - given users tastes, demographics. And the inventiveness of developers worldwide is astounding. We can't predict this, we don't want to be in the business of writing every single application. You will see us writing [apps/services], just as in the case of Office (which is a very horizontally available, broad set of applications). We do the same thing for Messenger and Mail, but there's lots of opportunities to do all sorts of innovative things using the base infrastructure.

RICHARD: Darryl Burling (a Developer Evangelist for Microsoft NZ) mentioned today at TechEd about being able to create "your own gadget-enabled website" using Atlas - which will enables developers to create rich interactive web pages. Can you explain a bit more about this? What kind of websites do you envisage people making?

GEORGE: If you go to atlas.asp.net, you can download the Atlas SDK. It works if your site is hosting ASP.Net, and there's a PHP version as well, and you just basically install this on your site and then users who visit your site essentially download the necessary client-side components - in order to do effective rendering of whatever you scripted/wrote.

So there's technically and legally - technically the bits are on atlas.asp.net for you to download. Legally there is a Go Live license that lets you  legally start to build businesses upon that if you so choose. Even ahead of a formal release, at which time it will become a supported Microsoft product.

RICHARD: Finally, is the Windows Live rollout closely aligned to the Vista rollout?

GEORGE: Logically they're disconnected. If you followed the re-org mails from a couple of months ago, there is alignment now in the management team. Steve Sinofsky's group is responsible for both the Windows Vista user experience piece as well as the Windows Live user experience piece - so there's unification from the organisational perspective, but not from a scheduling perspective.

Summary

To conclude the interview, George said they are very interested in feedback regarding things like the Contacts gadget - they routinely read the forums and blogs for feedback. He also noted that they can't predict every scenario that matters to people - so if you have ideas or specific scenarios for the Windows Live platform, you should contact the Windows Live team and let them know.

Photo: mobileme

Today George Moore, GM of Windows Live, announced the Windows Live Contacts Gadget beta at the Microsoft TechEd 2006 conference, in Auckland New Zealand (I'm here at the conference courtesy of Microsoft NZ). Live Contacts provides programmatic access to a user's contact list, providing secure access to 400+ M active users with 12B contact records. The user is in full control over their personal data, George said.

Here's the official word:

"Learn how, with nothing more than a little JavaScript, you can allow customers to use their Windows Live Contacts (Hotmail/Windows Live Mail and Messenger contacts) directly from your Web site."

For more, check out the developer info and two working samples. MS developer Danny Thorpe notes:

"The contacts gadget is client-side JavaScript that enables end users to use their Windows Live contacts (from Windows Live Mail/Hotmail and Messenger) with third party (non-Microsoft) web sites, conveniently and securely.  The gadget works with any web server, most browsers, and doesn't require reams of license or partnership paperwork with Microsoft.  You don't have to assimilate your web server into the Microsoft collective in order to play with Windows Live contact data."

You can also show your contacts on a map using MS Virtual Earth, as per below:

Windows Live Stats

George Moore also told the conference attendees some stats of the current MS active audience - 240M Hotmail users, 230M Messenger, 72M Spaces, 8M mobile subscribers. He tells the mostly developer crowd at TechEd that "this is the audience that can be reached by Windows Live services." He goes on to say that at any one moment, 20M people are simultaneously connected on Messenger and 5.7 Billion messages are sent per day. Also there are 300M F2F video conversations on Messenger every month. George said Spaces is "now the largest blogging service on the planet" (RM: so it's bigger than blogger.com?) - it grew to 30M accounts in its first 6 months.

The text of Microsoft chief software architect Ray Ozzie's speech at Thursday's Microsoft Financial Analyst Meeting 2006, makes compelling reading. To me it sums up why we've moved far beyond the Web 2.0 trend and into something much deeper and richer. Web innovation, which is primarily what my blog explores, is no longer just about Flickr, del.icio.us, the latest video sharing site, or the latest social network on the block. Those things have their place - and other blogs cover them well. But the real action nowadays is where Microsoft, Google and some under-hyped startups are headed... a world of many devices, all connected and managed by the Web. As Ray Ozzie put it near the end of his speech, we'll look back on this time as when "software and servers and services became enmeshed and intertwined".

Ozzie recognizes that the Internet is at the center of Microsoft's vision now. Their particular Internet platform is called Windows Live and this passage from his speech gets to the nitty gritty:

"The services offered up by the Windows Live platform are available to Web sites and also to client applications and also to mobile applications. And this is key to our strategy. Because it's our aspiration to create seamless Web, desktop and mobile experiences for all activities relevant to users and customers in all our markets.

And our model for doing so is to use our Windows Live services platform as an experience hub, and to use the PC, the browser and mobile devices as different experience-delivery mechanisms for the value we aspire to deliver.

In other words, Microsoft is using Windows Live as a hub to bring it all together."

The Hub Diagram, from Ray Ozzie's speech

The phrase "experience hub" has gotten a lot of attention these past couple of days, but the main takeaway is that Windows Live is the platform that Microsoft will use to base its entire business on over the coming years.

Indeed Ozzie explicitly calls Microsoft "a platform company" near the end of his speech. Remember, in Gates' era they were a software company - although Steve Ballmer has also called Microsoft a media company in recent times. But a platform company is definitely the best description of Microsoft now, even though software remains their trump card.

I was also intrigued by Ozzie's use of the term "optimization" to explain what essentially has been a central tenet of the Web 2.0 trend. Ozzie said:

"But beyond infrastructure services, what's most unique and valuable about a very large-scale services platform is what I'll refer to as optimization. By optimization I mean the monitoring and utilization of both collective end-user behavior and individual behavior to rank content for the user. That ranked content might be the order of advertisements in a search or e-mail window, or the order of relevant news items or playlists or video clips or items in a marketplace that are presented to the user.

We see the power of optimization every day in the relevancy of search engines and on Web sites such as Digg or Reddit and YouTube and Amazon."

This is Microsoft's way of saying they'll aggregate collective intelligence, filter and rank it, personalize it, yada yada (we've heard this song many times before over the past year or so). But actually I like the term 'optimization', because of its software connotations.

The term 'seamlessness' also pops up a lot in Ozzie's speech, recognizing that there will be a multitude of devices in this new services world. Note that I personally still think the Web browser has a big part to play in this world, as it is our lowest common denominator Internet-connected device (I ranted on that topic in a ZDNet post yesterday).

So in summary, I'm impressed by Ray Ozzie's vision. I love that Microsoft is spelling out their vision to the world too - and IMHO lifting the whole 'Web 2.0' concept up a notch. Of course Google is also pursuing the same kind of vision, only they leave it up to us to figure out what they're up to. Yahoo, Apple and others like Amazon.com are also players in this Internet-based services world. Plus a whole host of startups - and I'm not talking about social bookmarking sites or blog search engines! I'll be exploring some of the truly innovative and interesting startups in the coming months on Read/WriteWeb.

The Microsoft VC Summit 2006 happened a week or two ago, but I've only just had a chance to review the posts that came out of it. If you're interested in where Microsoft is headed with its product range and general Web strategy, there are some nuggets in the coverage. Don Dodge from the Microsoft Emerging Business Team covered the acquisitions part of the Summit. He noted that Microsoft has made 22 acquisitions totaling nearly $1B over the past 12 months, compared to just 9 acquisitions the previous year. What's more, "the acquisition pace is likely to accelerate." Given that Microsoft acquisitions "typically fill in holes in our product roadmap" and are usually technology-focused rather than business-focused (i.e. revenue/profits), it's interesting to note what market segments Microsoft has been buying into. Don listed them:

• VirtualEarth aka MapPoint - Vexcel and GeoTango do 3D imaging and remote sensing.
• MSN - DeepMetrix (web site stats), Massive (videogame advertising), Onfolio (web research), Teleo (VoIP), Media-Streams (VoIP), MotionBridge (mobile search), TSSX (China mobile services), SeaDragon (Large Image manipulation)
• Windows Live - FolderShare (file synch), MessageCast (MSN Alerts)
• Speech Server - Unveil Technologies (call center SW)
• Security - Alacris (Identity Mgmt), FutureSoft (Web filtering)
• Systems Management - AssetMetrix (License tracking)
• Business Intelligence - ProClarity (analysis and visualization)
• Microsoft Game Studios - Lionhead Studios (games developer)
• Exchange Server - FrontBridge (email security)
• Microsoft Project - UMT (Portfolio Mgmt)
• Storage Server - Stringbean Software (iSCSI SAN)
• Vista - Apptimum (Application transfer)

10 of the 22 acquisitions were for MSN and Windows Live (which can in essence be viewed as one and the same, considering content and services overlap so much these days). Also while Don notes that many of the above are consumer-facing services, a lot of consumer technologies are seeping into the enterprise market - as businesses take advantage of the hybrid, collaborative and 'best of breed' nature of web 2.0 consumer products. I also note the multi-device and multimedia nature of Microsoft's 22 acquisitions - two mobile, two VoIP acquisitions, two video gaming, three mapping/imaging, and an "Application Transfer" company.

I'm probably reading a bit much into the acquisitions, because who really knows what Microsoft has managed to build in-house and so didn't need to acquire. But if anything the acquisitions do confirm that Microsoft is very much focused on 'media' and consumer technologies, under the MSN and Live umbrellas. Steve Ballmer himself said, when adCenter was released at the beginning of May 2006, that Microsoft wants to be a media company. So the list of acquisitions sheds a little more light on that.

In other coverage of the MS VC Summit, Jeff Clavier made some excellent notes. He confirms that "Windows: The Live Software Ecosystem" is a major target of investment for Microsoft. He also noted yet another web 2.0 definition, but very appropriate for Microsoft (and Apple, Yahoo, Google for that matter): "Web 2.0 = Intelligence in all devices, and communication between all devices." Jeff had some great comments about the consumer/enterprise mashup too, including quoting Ballmer as saying that "Microsoft will deliver SN [social networking] functionality in their products for the enterprise."

EdSim also posted about the event and I particularly took note of his observation that communications and collaboration are key in Office 2007. In another post, VC Rick Segal wrote that Office 2007 will continue to be a leading software platform:

"...my suggestion to you when looking for a place to innovate and ride some of the MSFT coattail is to dig into Office, Sharepoint, Live Communications Server, and all of the developer opportunities contained within these products."

So all in all, nothing too surprising in all this. But it puts some more product context around Microsoft's well-documented move to be a 'software as a service' and media company.

Photo: nilssons -- "Bill Gates, CEO of Microsoft, throws a Windows 1.0 floppy disk in his office soon after the product's release. 1985 Bellevue, Washington, USA."

Microsoft has just released (or is about to) a series of new products: Windows Live Search Beta, Windows Live Toolbar Beta and the next version of Live.com. Details on my ZDNet blog.

One thing of personal interest to me is that a former Read/WriteWeb sponsor, web research product Onfolio, has been acquired by Microsoft and integrated into the Windows Live Toolbar. Congrats Onfolio!

I'll be testing out the new version of Live.com asap. I've actually been struggling with it half the day today, along with PageFlakes and Google Personalized Homepage. They are all unwieldy to use currently. For example half the Live.com gadgets I downloaded didn't work properly. It's early days for these products, but the user experience for all of them leaves a bit to be desired. So I'm keen to see what improvements Live.com has made...

Windows Live Ideas is a good place to bookmark (you know, that thing you used to do in the 90's with web pages when you wanted to regularly check for updates...). It outlines all of Microsoft's products on the Live platform, most of which are in beta currently.

Given the brand confusion about MSN and Live recently, here is a good definition of Windows Live:

"What is Windows Live?
Your online world gets better when everything works simply and effortlessly together. That's the basic idea behind Windows Live. So the things you care about - your friends, the latest information, your e-mails, powerful search, your PC files, everything – comes together in one place. This is a brand new Internet experience designed to put you in control. And this is just the beginning – you'll see many more new services in the coming months."

Also check out Marc Canter's view of Windows Live. He's excited about a possible open standards version of Hailstorm, which I commented on in my ZDNet blog.