Microsoft is touting the value of Windows in the face of a resurgent Apple. As part of the launch, Microsoft is celebrating seven days of deals in a number of key markets, including the United States. Among the specials is a $1,200 package from Hewlett-Packard and Best Buy that includes a Netbook, laptop, desktop, monitor and router as well as in-home installation.

“The Best Buy offer is a home makeover,” Microsoft Vice President Tami Reller told CNET News. “For the price of a Mac you have a new notebook, a new Netbook, a new desktop, and a new router to bring it together with the help of the Geek Squad.”

In addition to landing on new PCs, Microsoft will also sell stand-alone versions of Windows 7 that can be used to upgrade an existing PC. Although Microsoft still offers a half-dozen different flavors of the operating system in all, Redmond is focusing its energies around two versions–the Home Premium and Professional versions.

It will sell both a full version of the operating system that can be used on any hardware as well as an upgrade version to be used on existing PCs. Although both Windows XP and Windows Vista can be upgraded to Windows 7, only Vista can be done without backing up and reinstalling both programs and data.

A huge marketing blitz will accompany the debut of Windows 7, with Microsoft continuing its “I’m a PC” campaign, by featuring average users who point to various aspects of the new operating system as representing their idea.

Microsoft plans to formalize the launch with an event here with CEO Steve Ballmer (CNET News will cover the 11 a.m. ET event live). The software maker is also opening its first retail store, in Scottsdale, Ariz., as well as a “Windows Cafe” in Paris.

Steven Sinofsky, the divisional president who has spearheaded the development of Windows 7, is presiding over the Japanese launch of the product, while designer Julie Larson-Green is at an event in London. [CNET]

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Not only that—premium ad sales for the sites are up 20% this year. Why? Because while hot sites like Digg and Facebook outsourced ads to big players like Microsoft and smaller sites outsourced them to Google, Dogster has invested five years in building direct relationships with big pet food, supply and other consumer packaged good brands. “We figured each $50,000 ad deal was like getting another angel investor,” says Ted Rheingold, Dogster CEO.

These aren’t lame banners. These are coupons, contests and other things that incent users to interact with the brand. A recent example was a coupon from Royal Canin Cat Food. The company was hoping for 500 takers and it got 5,000. As a result Dogster and Catster charge $10-$12 CPMs and as high as $40 CPMs for their newsletter. (I interviewed Rheingold about this strategy back when I was co-hosting TechTicker. The clip is below.)

But there’s a problem. Dogster is still a small site and even happy advertisers will only continue to pay so much to reach the same users. So Dogster has solved that by deciding to become in essence the thing that it always argued startups shouldn’t work with: Ad resellers.

Dogster will now sell ads for the much larger Cheezburger Network of Lolanimal-related sites that include IHasaHotdog and ICanHazCheezburger—a never-ending meme that will hit one billion page views later this week. “That’s 10 billion cat pictures served,” says founder Ben Huh. “At 72 pixels per inch, if you laid them out end-to-end it would reach the moon and back four times.” (I’m guessing that moon part is actually true. Huh also told me that under the new deal every time they sold an ad, Dogster would ship them a free dog.)

The two have just closed their first sale to Clorox for Fresh Step Kitty Litter. Sexy? Maybe not. But it’s lucrative. But Dogster is no longer in the one million-unique category, it’s selling for six million uniques and until the CPM dies, this is still a volume industry. Neither company would comment much on the economics, but Dogster is taking a smaller cut than a traditional ad network would. In exchange, Cheezburger Networks has to do more work to make sure the ads are effective, whether it’s creating a contest or just tracking the metrics the way Dogster already does in house.

It’s an interesting announcement, since ICanHazCheezburger is so much larger and better known. Typically it’s the smaller site that outsources inventory to the giant. But the founders Huh and Rheingold were long time friends who’d frequently ask each other’s advice: Rheingold would ask how Huh got those gaudy user numbers and Huh would ask how on earth Rheingold was so good at monetization. Looks like the two will now be able to actually share those areas of expertise: Dogster now gets a network of six million uniques and Huh gets much higher revenues. [TechCrunch]

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Mr. BALLMER: 10/22.

Mr. ARRINGTON: 10/22. A decade ago the DOJ said that the browser and the operating system cannot be merged together. You probably know I’m talking about there. How do you feel about that with today’s world where Google is moving forward with Chrome OS and Chome Browser being merged?

Mr. BALLMER: I have no clue. I mean, how do I say this correctly? I don’t know what Google is doing. I’ll say that it is certainly clear that in the year 2009, the notion of operating systems being independent of internet access and internet ability to render important things in the internet is kind of not a sensible concept. And in every legal dispute we’ve been in, eventually, people agree with that. You know, we had to agree with some rules around that with the DOJ as part of the consent decree. We’re trying to agree on a new set of rules around that with the European commission, but I think we’re well past the point where people really question that it needs to happen. The question is for somebody who’s got our market share, on what terms does it happen?

You know, Google is talking about building an operating system with the name of its browser. Nobody should be confused. The browser they think of is the operating system and the question is you know sort of like Marc Andreesen in the late ’90s is back at work at Google. If you remember, he said something like, Windows will just be a poorly debugged set of device drivers running Netscape.

Mr. ARRINGTON: Yeah, he did say that. Yes.

Mr. BALLMER: Now, that’s kind of basically the attitude expressed in Chrome Browser, Chrome OS. Windows is just, you know, sort of a bag of bits that manages the hardware under the Chrome operating system and oops, we can even do our own device drivers for the Chrome operating system. Of course, the Chrome operating system isn’t available, hasn’t shipped.

Mr. ARRINGTON: Right.

Mr. BALLMER: It’s incompatible with the one operating system they have shipped. To me, still, I don’t understand why they needed another one. They must have gotten the first one wrong. They must – they’ve got the first one. I mean, I really don’t know. They must think they got the Android wrong and somehow. Otherwise, in the OS business, it’s generally advisable to get it right and stay right as opposed to have many of them. We have one and a half operating systems, Windows and Windows Mobile. Windows Mobile is kind of a half because it’s not entirely the same as Windows. And everyday, I say I’d love to get those two things to share more.

So I don’t know why Google before they have one successful one, decided they needed a second one. You know, I was expecting this Fall, or if not this Fall, next Winter, to really see a rash of essentially things that look like PCs running Android.

Mr. ARRINGTON: Yeah.

Mr. BALLMER: I think that’s a little tougher for them now because they basically tell the hardware community Android is dead, Chrome is the thing or maybe Chrome isn’t the thing. Maybe it is Android. The cacophony there is probably helpful to us in the grand scheme of things and I don’t know why they would have chosen to do it, at least the way you read the press.  It probably has a lot to do with internal squabbles, but I just don’t know.

Mr. ARRINGTON: When you think of Windows 7 and explore competitive positioning versus Snow Leopard which just came out and has had some problems, and also, Chrome OS, how do you think about that?

Mr. BALLMER: I don’t know how you position against something that just doesn’t exist.

Mr. ARRINGTON: That’s fair.

Mr. BALLMER: Really, I don’t. So, when you do it, can I do Android or do Linux?

Mr. ARRINGTON: You can do either.

Mr. BALLMER: I think, well, because I sort of understand if you look at the competitive vectors – here’s Windows and Windows is a very successful product. How do you attack Windows? Well, you attack with the high end, and hardware. That’s an attack. That’s – I won’t call it the Snow Leopard attack. I’ll call it the Mac attack of which Snow Leopard is a piece. You could attack from the side. That’s the Chrome – Firefox attack. You can attack from cheap, from below. You’re not from the side. You’re one on one, but that’s kind of a Linux, Android, presumably Chrome OS, who knows, attack vector. You can attack through phones that grow up. You know, mama don’t let your phones grow up to be PCs or something. I don’t know. But that’s another attack vector. So, you could say how do I feel about all these attack vectors? Strong, I feel very strong here.

Mr. ARRINGTON: Yeah.

Mr. BALLMER: I mean, we’re gaining share. Apple is expensive. And in tough economic environment, people get it. Their model is, by definition, expensive. And we’ve actually held or maybe even gained just a tiny bit of share relative to the Mac in the last 12 months. And it’s not really Snow Leopard. It’s really Windows PCs versus Mac.

That’s the trade-off. We’ve done extremely well versus Linux-powered machines with the Androids or Linux and we’ve done that primarily by having a better solution and being willing to do the right thing from our pricing perspective. And Windows 7 will only make this, I think, more competitive here.

Mr. ARRINGTON: And part of what we’re talking about here is Netbooks, of course.

Mr. BALLMER: Yeah, well, Netbooks are just the first battleground.

There’s no question that there was a Linux PC battleground and then it became “the MID” and if you remember that mobile internet device. That’s what they call Netbooks before Netbooks, is in the new battleground. We’ve done a very good job and I think we’ll continue the job.

Phones, I think the jury is out. Nobody has yet tried to take the phone and turn it into a PC or take a PC and turn it into a phone. But this is where we have to be. We’re going to have it and we’ve got to have our phone act together. I like our 6.5 release. I like our plans for the future. But you know, we’re certainly in a period now where competition has got a lot more commotion.

Mr. ARRINGTON: As you said the market there is just getting started.

Mr. BALLMER: It’s still awfully nascent. People don’t think about it that way because phones aren’t nascent. Smart phones are more nascent. And then this attack is perhaps the most, I don’t mean this in a negative sense, but it’s the most insidious because some people don’t even know that it’s really an attack. Those are operating systems. They all run their own proprietary rich-client code and we’re competing against them.

The most successful by far is Firefox. Chrome is a rounding error to date. Safari is a rounding error to date. But Firefox is not. The fact that there’s a lot of competitors probably is to our advantage. Yeah, we’re right now about 74 percent overall with the browser market, roughly speaking. But we’re having to compete like heck with IE 8, with great new features. The other guys are getting more and more unanticipated competitive attack factors, the thing that Google announced yesterday where they replaced IE but they don’t tell you.

I mean that’s how I would say it. For all intents and purposes of what they’re doing IE is not there. It’s their operating system. Instead of now masked as browser, it’s masked as a plug in basically to IE. So, you know, we’re going to have to compete like heck and you know, see where things go. The one thing that’s unclear is what’s the economic play for anybody else competing with us at the browser level. Is this all about kind of controlling the search box or is it about something else?

Even Firefox – all the economics from Firefox come from that box.

Mr. ARRINGTON: The search box.

Mr. BALLMER: The Google search box, yes.

Mr. ARRINGTON: You have, I think Silverlight has  — 35 percent of computers have Silverlight on them.

Mr. BALLMER: Yeah. That’s right.

Mr. ARRINGTON: Is Silverlight essentially competing with Windows? I mean, the way you described some of this here, it’s like they’re competing with each other.

Mr. BALLMER: No, it depends on what the strategy is. IE only runs from Windows. Anybody who uses IE uses Windows. So does it compete with Windows? No it helps Windows. [TechCrunch]

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Apparently, there are also plans for a new, low-power Atom chip due next year meant to compete with current CPUs driving mobile devices like the iPhone, netbooks, and set-top boxes. The indication we’ve been given is that that product (coupled with the Light Peak standard) could provide the basis for some “big” MID news in 2010… but not from Apple. As we saw at the announcement, Sony is also a first-tier partner (though not nearly in the connected way Apple is), and it looks likely the company could find use for that pairing (especially with its entry into the netbook market this year). We can’t see Apple utilizing an Atom chip in anything, especially when it’s busy cranking away with P.A. Semiconductor and its rumored projects. [Engadget]

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Microsoft has a history of collaborating with other firms, especially in the E&D division: Zune and Xbox have both gone through similar design processes. (And plans for the Microsoft Store leaked through a third-party agency were confirmed as genuine prototype layouts and concepts.) This video is branded Pioneer Studios, a Microsoft division within E&D that specializes in this kind of work, working with another agency that’s a long-time Microsoft collaborator on confidential projects.

The Courier user experience presented here is almost the exact opposite of what everyone expects the Apple tablet to be, a kung fu eagle claw to Apple’s tiger style. It’s complex: Two screens, a mashup of a pen-dominated interface with several types of multitouch finger gestures, and multiple graphically complex themes, modes and applications. (Our favorite UI bit? The hinge doubles as a “pocket” to hold items you want move from one page to another.) Microsoft’s tablet heritage is digital ink-oriented, and this interface, while unlike anything we’ve seen before, clearly draws from that, its work with the Surface touch computer and even the Zune HD. [Gizmodo]

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I never fully believed the Apple tablet was real beyond dreams, until I heard these words over my phone: “Hey, it’s [redacted]. I may or may not have sat in some Apple meetings for the tablet.”

I was driving, and swerved a little bit, even though both hands were on the wheel. Someone honked at me.

“What was that?”

They repeated themselves.

I switched on Bluetooth and pulled over to the side of the road to hear the story. You see, earlier in the day I’d given my phone number out to someone who sent me a cryptic email wanting to talk Apple. This must have been them. (Later on I verified to a high level of certainty that they were in the position to have access to the information and after talking to them for over an hour, I believe them to the same level of certainty.)

“The device, which I’ve held mock ups of, is going to have a 10 inch screen, and when I saw it looked just like a giant iPhone, with a black back— although that design could change at any time” they said, “with the same black resin back, and the familiar home button.” That’s obvious.

“But it will come in two editions, one with a webcam and one for educational use.”

Educational use?

They continued to explain the device as something that would sit between an iPod/iPhone and a MacBook, and would cost $700 to $900—”More than twice as much as a netbook,” they said.

To make up for that cost and make the device more than just a big iPod there was, this person claimed, there was talk of making the device act as a secondary screen/touchpad for iMacs and MacBooks, much like a few of the USB screens that have come out in recent months from Chinese companies. Very interesting.

Original source and the rest of the article – Gizmodo

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