Gates sizes up the Web's next generation

Think Web 2.0 and think Microsoft? Not necessarily.

The company has long provided the tools for building Web sites. But it's been a couple steps behind when it comes to some of the bigger ideas and business models that have surfaced around Web 2.0, such as advertising-based software.

In addition, Microsoft has long made devices--whether it's the PC, server or handheld--the center of computing design. Now Web sites are becoming programmable, allowing people to "mash up" data from different sites.

To try to capture--and participate--in some of the buzz around Web 2.0, Microsoft organized a conference in Las Vegas called Mix '06 aimed at Web developers and designers. After his keynote speech at the conference Monday, Microsoft chairman and chief software architect Bill Gates spoke to CNET News.com about the push into hosted services, competition with Google and mobile computing.

Q: A lot of the buzz and thinking around Web 2.0 has come from outside Microsoft. Is this conference an attempt to get more involved there? And does that concern you at all?
A: Gates: Well, for the key new technologies that enable us to take the browser to a new level--DHTML, JavaScript, XML capabilities--we've been the pioneer.

If I'm a consumer or small-business owner, I could get a lot of applications in a hosted version, from project management to word processing. In that world of Web applications, how do you make Windows Vista a must-have?
Gates: Well, Vista is probably more relevant now than ever because, as you're browsing, you want to download Active X controls and have a security framework in there. Having the kind of "reputation" services we built into Vista makes the community value more important: We know which Web sites are phishing Web sites. We know which controls people have had a good experience with. That kind of reputational value may be one of the biggest things people get out of Vista.

Video: Gates on
Web 2.0
In interview with CNET News.com, Bill Gates says Microsoft is ready to mix it up with rivals.

Likewise, the ability to download code and compartmentalize it--that's kind of a breakthrough that's come out of the fact that we're down the learning curve on security--way more than any other company--I can say 100 times as much. In the last three years, it's been our biggest R&D priority, and we've made breakthroughs.

Vista, in terms of rich media--people are doing movies more. People want to organize and find those things. They want to work offline as well as online. We picked the things where people want Windows to (work) better.

People are designing applications with the Web in mind. In the past, you've been more Windows-centric with development tools. Will you be pointing developers to write applications where the Web is the development platform?
Gates: The Web is where a lot of code is being written, and you can go back to the year 2000 and the .Net initiative. .Net was designed to let people do state-of-the-art Web sites. In fact, .Net's success has been the primary platform for building Web sites. It's been quite phenomenal.

People are using other tools--around scripting, PHP and all that. But we've come in and really targeted that market. And as people do richer Web sites, we think the richness of what we've done there will go beyond the scripting-language-type approaches, which are fine. But more and more people will do sophisticated things. So there's nothing dramatic here, in the sense that the Web just happened.

The Web is evolving. There's a little bit more maturity now, in terms of business models with advertising coming in, with some of the late-'90s mistakes understood. But we're probably, as an industry, making some of those same mistakes. And that's OK. The ferment, the creativity, is incredible to see.

You've been talking about the Web as a development platform for years. Internally at Microsoft, have you made the switch?
Gates: (Microsoft's) first company meeting around software as a service goes back over seven years now. We said it's a lot better for us and customers. Instead of viewing software as a one-time thing--you buy a new version, you're using that--if we have a continuous relationship (with) something like Watson, where we monitor what people are doing and the drivers they are using, Office Online can get templates and download new things.

It's letting our software innovation be more connected to the user, more customized to what they want. It's a great paradigm for us--to create new value. We did underestimate advertising, so an element of what we're doing there is catch-up.

There was a major demarcation when Ray (Ozzie) put out his memo last year, really saying the primary applications model will have everyone delivering through the Web, monitored through the Web, updating through the Web. And many of these services, like storage or authentication, that you think of as

Active Directory or SharePoint on premise--we've got to get those out (so people can) simply connect up to them. We're making great progress on that.

That's what makes this industry fun. Even Microsoft, with incredible research capabilities--the marketplace will come along and show us to put more into this and what is not paying off. We've got to be very dynamic. So far, throughout our history, our epitaph has been written 10 times, and so far, we're still alive. It's fun to see we're going through another one of those cycles.

And particularly, people think Google was born on this (Web application) paradigm, and (are wondering whether) any of the traditional software companies understand and can actually push this paradigm. Here at this conference, clearly, we're saying we've got the best tools for this paradigm, and we want to know where we should take it.

Last week, you said you're going after IBM. As you look at the next generation of applications across the board, who do you think is your primary competitor? Is it IBM and its platform, or is it Google and its Web platform?
Gates: When it comes to supplying enterprises and having that long-term relationship, we and IBM are hotly competitive in doing that.

Video: Mix '06: Gates keynote
From the stage of Mix '06, Bill Gates discusses building new online applications.

In terms of thought leadership, if someone said who's cool right now, obviously, Google would be high on the list there. Really, one thing they've done that's been key to their success (is search). We have to provide a better search experience--and get people to think about search in terms of these tasks, these contexts. We think we have a lot to contribute there. Not many people are brave enough to compete with something with that kind of scale and momentum. Well, we are.

Google bought a little company that does an online word processor, and there's talk of it doing an online calendar. Do you think it could assemble a Web "office" and compete with what you have?
Gates: I think they can do anything they want. Remember Orkut? That was a great social-networking thing that I don't think has been heard of for the last few years. They came out with an instant-messaging voice-type product.

Certainly, there will be lots of ways that people offer software over the Internet. There will be so many companies doing these things. It's not really appropriate to look at just one.

Not many people are brave enough to compete with (Google), with that kind of scale and momentum. Well, we are.

The idea that there will be complementary capability, where using rich-client capability and Web capability--that's a big theme from us. You can look through our history. We've been pretty rational as the fads roll through. Yes, there's a lot to be said for that, but that doesn't take away from the fact that you want--when not connected to the Internet--access to your information. You want richness and responsiveness that local applications can provide.

There's a lot of experimentation with business models. Are you concerned that some of the business models are not quite baked?
Gates: Well, I think we'll see the same types of things we always see, with lots of new companies and new ideas. Ninety percent will not be distinct enough or not have the right business model, and those will go away. And yet the 10 percent that emerge will show new and neat things. Take all the companies doing video today. If you asked me today which ones will be here five years from now, I couldn't really say and yet--I love using them. I think what (they've) got there is neat and exciting.

I do think some of the bigger players, like ourselves, Yahoo and Google, will be in that space, offering those capabilities as well. But there's room for some great success story to come out of it. I think it's a bit unclear, though, now how far it can go.

What problems do you want Ray Ozzie thinking about, as one of your chief technical officers?
Gates: He's a phenomenonal person, in terms that he thinks like a developer and thinks like an end user. He'll sit down and literally do story boards--if I want to do this scenario, how can I do very few screens to get to that?

Everything he's done in his career has been a leading-edge thing. He, more than anyone, is thinking: What is a "Live" application? How is it different from a classical application and, therefore, what services should Microsoft provide? He's gathered a top group of Microsoft people, and he's driving that idea of how to design a platform. But because he's Ray, he's keeping in mind those end-user things.

We wanted to hire Ray for decades--literally. But the timeliness of his coming in and knowing he's shaped his mind around what these new applications look

like is phenomenal for us. Having someone full-time thinking about that evolution is very, very important.

From a business point of view, what do you think is the bigger opportunity? Is it selling the servers and tools, or is it the advertising?
Gates: Well, advertising--nobody really knows what the limits to that are. There will be experimentation to having you watch ads while you're doing anything on the computer, because people will see if they can't make money that way.

I think the thing that will jump out over time--when you're in the context of buying, when you want to organize a trip, an event, pick a gift--will be tools far beyond search that help with that.

There is debate that just doesn't go away, between the Web services protocol stack called WS Start and the simpler approach of XML over HTTP. Do you think that you overengineered Web services?
Gates: I feel super good that we did the hard work (with Web services) and made that an industry standard for rich interoperability. The lead times for that--figuring what standards body to put them in, the testing with IBM products and all those things--that is the one we really needed to put the energy into. Now we can circle back and say, "OK, let's make sure that the tools for all that spectrum are very strong."

When do you think ultramobile devices will become mainstream devices--and even a PC replacement?
Gates: Well, it is a PC, and for a lot of people, it will be their second PC. And I'm a total believer in the tablet--I think it will be totally mainstream. Whatever it takes, Microsoft will be behind it to make it better and better. If I'm critical of us, I'd say that making it easy to have multiple PCs (and having) your "state" just show up on those PCs--that's been partly holding people back.

The Origami--you want to take it to meetings with you, but you don't want to think about syncing before you walk out to that meeting. (The information) should just be there.

You were critical of the $100 laptop idea for developing countries that's come out of the MIT Media Lab. Can you tell us what alternative approaches you're pursuing?
Gates: Anybody that is doing low-cost PCs--that's great. We love low-cost PCs. I do think you do need to think about the cell phone. We're doing some things to let it display on a TV-type screen. Because it's got a network, because it's got a business model, that will often be your first PC (equivalent, in a developing country).

Or (there could be) a shared PC where you go to a community center and you want a large screen and multiple people can stand around it. The PC industry is very, very competitive, so all the varieties (are) going to get tried. I think countries should let their marketplace figure out where's the training, where are the communications networks, where's the content.

It's a very complex thing that probably doesn't lend itself to a top-down approach, but everything that drives computing out to more people we are very, very enthusiastic about.

But you seem to prefer a cell phone attached to a TV?
Gates: No, I don't prefer any--to be clear, I think there's going to be a variety of form factors that relate to the different environments. After all, the communications cost is really the hardest thing here. We have PCs down at $200--and that's fine. Some of those even have a battery in them. So you don't miss out there--where you miss out is the broadband connection, the curriculum, the support--all the elements that can make it relevant.

Because, after all, we don't just want PCs out there. We want them out there connected and used and relevant so that they lead to more economic success. Certainly, between Microsoft and the (Bill and Melinda Gates) Foundation, I spend a lot of time in developing countries, looking at the realities. It's very complex to make sure you get all those pieces lined up.