… For Its Search Volume

Microsoft CEO Steve Ballmer said at a conference that he’s still interested in acquiring Yahoo in order to build a search powerhouse that could better compete against Google.

Ballmer made those comments on-stage Thursday at the McGraw-Hill Media Summit in New York during a conversation with BusinessWeek Editor-in-Chief Stephen Adler.

Yahoo last year rejected Microsoft’s offer to acquire the search engine giant, worth nearly $45 billion.

Ballmer said Microsoft’s interest in Yahoo is not about search technology, as Microsoft already has the technology. Instead, he said, the interest is in the volume of the searches.

“It’s really about getting the pooled volume, because you actually can improve your product faster if you have more users,” he said. “The more users you have, the more data you have about what users are interested in. The more users you have, the more advertisers you get. That doesn’t just help with revenue. The more advertisers you have, the more relevant you can make the ads.”

Ballmer cited, as an example, a user searching for Thirteenth Century Venetian art, where it might be nice to have an ad from a Thirteenth Century Venetian art dealer. “They’re not bidding on LiveSearch right now,” he said. “But we’ll say you want to buy a book on Venice, and who knows what Google might say.”

So there are returns to scale, and putting the scale together is valuable, Ballmer said.

“From a technology perspective, whether we call it Kumo or whatever it is, it’s all about doing great table takes, playing the relevance game as well as Google, and then driving super hard on driving the user experience in ways that are valuable to the user,” he said.

Microsoft is following that strategy with or without Yahoo, but the question is one of scale, Ballmer said.

He said that after Carol Bartz took over last month as CEO of Yahoo, he talked to her over the phone and said they should talk more after she has had time to settle in. “I’m sure, when it’s appropriate, we’ll have a chance to sit down and talk,” he said.

Ballmer said he has known Bartz for years as a straightforward, friendly person. “If I want to talk to her about something, when she’s ready, we’ll have a real discussion because she’s that kind of a person,” he said. “Whether a deal gets done or not, who knows?”

When asked straight out by Adler whether Ballmer thinks there will ultimately be a deal between Microsoft and Yahoo, Ballmer said in response, “I think there are a lot of things that are fairly compelling economically in trying to put together our two search efforts in some kind of a partnership. Obviously, I spoke fairly strongly economically with the bid we made last year. I got bailed out of this economy by Yahoo on that. But it speaks to the fact that I do think there is a fairly compelling set of economics that underpin the idea of a search partnership, and, unless I’m fooling myself, over time I would expect there’s a good opportunity for a deal.”