Steve Ballmer, Microsoft's CEO, tried at the Web 2.0 conference in San Francisco to convince the audience that even if his company is trailing prominent companies in other segments than the software business, things are going to change over the long run. Furthermore, Ballmer outlined the software giant's strategy in acquiring other businesses in the near future.

Essentially, Ballmer said that it makes much more sense to buy small companies, mostly in the $100 million to $200 million range, rather than spend a huge amount of money on a company like Yahoo, as it was previously rumored. Through these acquisitions and the company's own efforts, Steve Ballmer seeks to make Microsoft a "three- or four-trick pony," rather than the one-trick pony that it is.

"I’m happy with everything but everything needs some improvement –sort of like your kids," said Ballmer, emphasizing this image over several remarks. "You’re 3-years-old and you’re playing basketball with 12-year-olds. You’re going to dunk on the other guys some day!" he said of Microsoft's advertising business.

He also sort of blasted Google's foray into the office software suite business, and said when asked that he didn't think Google’s word processing and spreadsheet applications were any good. Well, what else could he have said...

Ballmer did not want to comment on the rumored acquisition of a stake in Facebook, and neither did founder Mark Zuckerberg, who also spoke at the conference. Zuckerberg's only information was that a financing deal was "almost wrapped up."

Google handled 56 percent of U.S. Internet searches in August compared with Yahoo's 23 percent and Microsoft's 11 percent, according to ComScore, but Ballmer's warnings may mean that Microsoft is not going to give up anytime soon. Also, he hinted that Internet advertising will change considerably in the next few years. Ballmer suggested that in the future richer content such as video and pictures will probably be sold with attributes like guaranteed delivery. This may mean that raw traffic will have a much smaller significance than it has today.