Qi Lu, president of Microsoft’s Online Services Division (OSD), talked this evening about the future of search and the Web at Microsoft’s New England R&D Center. Here are a few highlights.

Observations about the present:

• The search industry is consolidating with two leading players, Google and Microsoft.

• Groupon, or the new category Groupon represents, moves online advertising from .5 million advertisers to 10 million advertisers.

• Innovation can be done at a lower cost because of the integration of hardware and software (e.g., devices from Apple, Google, Microsoft) and cloud based services.

Evolution of the Web: Topical (HTML) to social (people) to geo-spatial (places) to tasks (apps):

Social

The big innovation of Web search’s early days (i.e., Google) was the use of “anchor text” (topical labels). To this day, the only “roads and bridges” on the Web are nouns, not verbs (or example, search doesn’t understand “make an airline reservation”). The first step in re-defining what search means is to marry the topical graph with the social graph (which is what Microsoft is doing with Facebook). Search engines do a good job providing popular opinion and a decent job providing expert opinion but they are not good at delivering trustworthy opinions – from the people you trust. Search needs to become a social experience.

Geo-Spatial

What’s nearby becomes a new “anchor text.” Geo becomes another organizing principle. a number of companies are investing in building a digital representation of the planet.

Tasks

“The applification of the Web”: re-organize the Web for task completion (including ads, deals) and understanding user intent. The more data we put on the Web, the more links are created and more knowledge is generated. “The time has come to deliver knowledge, to understand everything in the digital universe, to understand how everything is linked.”

My observations:

Insightful analysis of where search has been and an intriguing roadmap for the future, albeit one that seems to be shared by Google and others. One missing dimension in this presentation/vision is the idea that “search” should be proactive, i.e., your mobile device pre-emptively discovering and suggesting to you choices based on context. “Proactive” may be included in “understanding user intent,” but if so, it should be clearly stated, possibly as part of a larger discussion of how “search” will turn into “discovery.” And, it maybe better to talk about the end-result of this “new search,” not as more knowledge, but as better decisions.

Another missing topic was privacy. Rather than avoid what is potentially the biggest obstacle to realizing this vision — privacy concerns of users, and most importantly, politicians — better be proactive and provide an answer (and a better answer than Eric Schmidt’s: “with your permission…”).

After hearing (and assisting in creating) many similar presentations (“The future of…”) delivered by senior industry executives over the last twenty years, I must say I found Qi Lu’s style (and substance) to be much more serious, profound, and uplifting. No wonder a number of the questions after his presentation tended to the more on the philosophical rather than practical side of things. Still, he delivered one of his best (practical) insights of the evening in an answer to a question: “Advertising is the efficient allocation of human attention.”