Google may be forever denying that it is a media company (and an ad agency), but Microsoft is embracing the transformation of software into media and the overall convergence of media and technology. Yusuf Mehdi, Microsoft’s senior vice president and chief advertising strategist, said in reference to denying rumors of a Microsoft acquisition of Yahoo (via MediaPost):

“We think we have the largest audience to monetize,” Mehdi said, when looking across the entire Microsoft suite of products–from Office to Xbox. “I don’t think it’s the end of inning one.”

Didn’t Microsoft used to “monetize” it’s Office software through licensing? It was a good business, but Google has shifted the business model for software from licensing to advertising. Now it’s all about audience — monetizing audience. I guess the $6 billion aQuantive acquisition is intended to help with that. Mehdi went on to say:

With the aQuantive purchase, Mehdi said, Microsoft is poised to become a leader in what he called discretionary advertising–matching an ad buyer with an audience rather than specific pages.

It’s not entirely clear what this means, but it could certainly be read as a swipe at page-view-based advertising and contextual ad placement. As to the assertion that matching advertising with audience, i.e. media 101, is “discretionary” — that suggests media has traditionally been rife with indiscretion. I suppose that’s true, given that no one ever shied aware from the half of advertising is wasted maxim.

Mehdi also says:

“The ad market has converged,” Mehdi said. “Anyone who thinks it’s just online search is missing that. It’s all just inventory.”

Indeed, the “convergence” is upon us. Microsoft, like everyone else, is clearly making it up as it goes along. But it’s clear that the center of gravity for the media and advertising industry has shifted even further west.