After it struck its online advertising and search partnership with Yahoo, Microsoft tapped longtime Internet exec Brett Wayn (pictured here) to work with Greg Nelson during the integration.

Well, Wayn must have liked what he saw at the Silicon Valley Internet giant, since he is bouncing there from his job at the Redmond, Wash. software giant to help run local efforts at Yahoo.

[UPDATING local roles at Yahoo.]

Wayn will be working for Chief Product Officer Blake Irving and will be responsible for product management of Yahoo’s local “horizontal.”

He will work closely with whoever Yahoo finds as a replacement for Matt Idema, a longtime Yahoo exec who shuttled over to Facebook as a director of business operations, working on the local arena.

Luke Beatty, who heads up Yahoo’s Americas region community and local businesses, including Flickr, Groups, Answers and hundreds of local sites, is doing Idema’s job for now within Americas head Ross Levinsohn’s unit.

Local is a hugely hot space right now, with a spate of Web focus from giants like Google and Facebook to powerful start-ups such as Foursquare and Groupon.

Wayn has more recently been working on international for Microsoft’s MSN portal. The Australian native has also worked at AOL and, interestingly, has an actual medical degree.

In other words: Paging Dr. Local, stat!

Yesterday, BoomTown posted Part One of an interview with Microsoft’s Greg Nelson and Yahoo’s Mark Morrissey.

The pair (pictured here) are in charge of a two-year effort to coordinate a massive search and online advertising partnership, the result of a deal the companies struck last year.

It is critical they get it right, as Microsoft (MSFT) and Yahoo (YHOO) have a lot riding on the success of the effort, which is an attempt to catch up with search giant and dominant market leader Google (GOOG).

The companies–one from Washington state and the other from Silicon Valley–have a combined share of close to 30 percent, and the hope is that together the partnership is a better offering to both advertisers and consumers.

We’ll see about that, of course, but here’s the rest of what they had to say about the attempt in all its gory details:

MARK MORRISSEY: Let’s talk a little bit about–hopefully this won’t be too boring–but let’s talk a little bit about the execution process, because then this will give you the insight.

So, remember, Greg said we had about 25 people in each of our respective transition teams, that basically there’s a lead, and they’re all mirrored for each of the major elements of the program. Each of them, they all have their own execution structures, right, because they have whole teams of people that are working on their stuff.

So, we basically…Greg and I lead the overall transition. There are three primary areas: The algo transition, the paid search transition, and all sales and marketing. That third part is maybe the biggest of the three.

Then the 25 underneath that group, and then there’s hundreds and in some cases thousands of people underneath them in support of that.

So, they have each of their own weekly cadence of when they get together and how they make their decisions. That rolls all up to Greg and I, and Greg and I are responsible for what we call the plan of record that sets the milestones and locks the scope and the sequence of markets.

We completed our plan of record, except for the sequence of markets, because we’ve not finalized that, but all the rest of it, the scope, the timing, major milestones. We signed that off in what we call our joint operating team that meets weekly up here. And that’s just about 16 people on the joint operating team.

GREG NELSON: Yeah, more or less, all your core leads.

MARK MORRISSEY: We meet weekly. We make basically the scope change control decisions, any changes in milestones.

So, that’s how we control the overall program, keep it on schedule; we look at confidence levels, sign off on road maps, final signoff, that kind of stuff gets handled there.

Then once a month each of us…so, I meet with [Yahoo CEO Carol Bartz]. So, I work for Carol. I meet with Carol’s staff, give her staff a full briefing. Greg meets with the executive steering committee.

And then about every six or eight weeks, Carol wants to get together.

So, we have real, unbelievable top-down support and engagement, and we have a formal decision-making process that goes all the way down from the individual sub-element of the program up to a common place that we guide and make decisions on.

BOOMTOWN: And going forward–what I’m thinking about is things that happen later that you might want. All of a sudden Google is doing search by mental telepathy, for example.

MARK MORRISSEY: I heard about that one, yeah.

BOOMTOWN: Whatever they’re doing.

MARK MORRISSEY: It’s going to take them a long time to get that done.

BOOMTOWN: Well, they’re aliens. I told you, they’re aliens. No one believes me.

So, they decide to do something that you need, or else you like come up with some grand new idea that Google hasn’t thought of. How does that go into place?

GREG NELSON: Well, I mean, it could be…it would probably start informally, right? So, Mark and I either talk or email basically every day.

MARK MORRISSEY: Usually many times.

BOOMTOWN: I’m talking about year four.

GREG NELSON: Yeah, I know, but I’m just saying the strength of the relationship is in large part…you know, this is the pivot point. You’re sitting with the two guys to try and pivot this thing both up and down.

More likely than not, like just before you were coming up here, we were trading notes on a couple different processes that we’re trying to build or checking in on one thing or another.

So, if [Microsoft Online Services President Qi Lu] gets a big brainwave about the next big thing we’re going to do in search, and we’re going to build it into the API, probably what happens, because I get asked to do this 50 times a week, is, “Hey, why don’t you chat with Mark about that and see if Yahoo has got any interest.”

So, you’ve got this really high-frequency, pretty high-fidelity conversation, and then we might say, okay, yeah, that’s interesting, like let’s go activate it in the sales track and in the ops track and let’s pull in some of our leads, let’s brainstorm it, and then you’d push it in both directions.

MARK MORRISSEY: Right, because it has to fit into both companies’ road maps, right, and then what sales and marketing does, and if it’s customer facing it affects what sales is going to do.

GREG NELSON: And then you’d say, okay, we have this plan of record, that’s a big enough one, wow, that’s an amazing idea, let’s change the plan of record, and then we have a formal process to do that kind of change.

MARK MORRISSEY: And four years from now the plan of record won’t be around transition, it will be around what’s the next set of releases, what are our market objectives, how are we going to go.

BOOMTOWN: Let’s talk about that, what the next, when you’re not as you’re thinking this all the time on a daily basis, what is from your perspective the next thing in search or things that are further along.

GREG NELSON: Next big idea?

BOOMTOWN: Yeah.

GREG NELSON: Is that what you mean?

BOOMTOWN: Yeah.

GREG NELSON: Yeah, we can come back to that one. I’ll try and think up something really smart by the time we get back to it.

BOOMTOWN: Okay. So, sales and marketing.

MARK MORRISSEY: Yeah, so like I said, one of, if not the most important area for long-term success, is around sales and marketing. There’s a rather interesting and complicated setup here where we have a larger sales team with a little bit more experience, and then each of the regions, right, will have their sales teams. The sales team will still report to [Yahoo U.S. head Hilary Schneider] to run the overall thing, but the sales teams report regionally. And yet they have to learn adCenter.

So, there’s just a tremendous amount of training, right, to bring the Yahoo team up on adCenter, because I think the most important thing is not the transition, it’s optimizing on behalf of every advertiser after the transition, to achieve their market objectives.

There’s just a humongous amount of training broken up into four courses, huge investment that the Yahoo team is making in the training materials and the man-hours and all that preparation work that they have with their customers. All the customer communications that are happening now, we’re starting to do joint communication events, we had a big search alliance forum in Seattle two weeks ago.

GREG NELSON: Yeah, the search and marketing forum was here, and so we brought customers in a day before to just spend a day with Microsoft and Yahoo to learn about the search alliance.

We got up on stage first and sort of told the vision and took just open Q&A and said, what do you want to talk about, and then we had breakout groups with customers just to say what are you really interested in, what does a successful transition look like to you, what services or kind of information do you need.

This is an area where you could easily be in tension, right, or where you could have conflict between your two sales forces. That’s been so much easier than I would have guessed, because of the maturity and professionalism.

We still handle what we call standard advertisers. So, if you are not a hand-sold kind of premium customer, but you come directly to the platform, then you come to Microsoft, because you’re really just coming to adCenter. Otherwise, you’re with Yahoo and Yahoo is your sales force.

BOOMTOWN: And I assume if you ever got to a display agreement struck, that would be a similar.

MARK MORRISSEY: I can’t comment on display, but there’s definitely a synergy between search and display, as you well know, yeah.

[But] I think I should talk about two things that we haven’t covered. One is about the benefits of the combined marketplace, and then also we haven’t mentioned anything about where we are in terms of the current progress, because it’s actually from my perspective pretty phenomenal in terms of how much we’ve gotten done.

Starting with the unified marketplace, one of the biggest benefits here in a scale business is having a sufficient level of volume in a single buy, with a single campaign, a single set of optimizations, to help advertisers to achieve their marketing objectives.

So, by combining each of our respective share numbers, it now produces really for any sizable advertiser close to 30 percent, plus or minus, right, depending on a couple things in the U.S., and that’s a must buy.

GREG NELSON: Lots of upside.

MARK MORRISSEY: We’ve got work to do.

GREG NELSON: Unlimited potential.

MARK MORRISSEY: Our Yahoo consumers who want to stay on Yahoo search, and we believe that because of the relevance of Microsoft’s results and the rest of the stuff we’re going to put around it, and how we wrap search into the overall experience, we shouldn’t give consumers any reason to go anywhere else to search. That should just lift share in and of itself.

GREG NELSON: The other nice thing, both if you want to look at it that way, is the more lopsided the share, the more enthusiastic advertisers and publishers are about the search alliance.

We have lots of friends all around the world rooting for us and asking how they can help.

MARK MORRISSEY: So, the benefit of a unified marketplace is that advertisers, you know, today they spend most of their time on Google, a little less time on Yahoo, less time on adCenter, and now we’re going to give them one system, one buy, with more clicks, which gives you more consistent performance. Their time is better spent on that optimization.

And not only does that generate just natural lift across the marketplace, but the main byproduct is it produces better ads. Better ads help produce a better search experience, better search experience and all positive…to feed the positive virtuous cycle.

We’ve gotten outstanding feedback, not that every single advertiser is happy, because there are some advertisers that would like to see maybe a non-liquid marketplace, because that was good for them. But, by and large, you look across the base, our customers are very happy.

The biggest thing is they want us to do it with quality, and they want us just to be transparent with where we are along the process.

So, can we switch to talk about where we are?

BOOMTOWN: Okay.

MARK MORRISSEY: So, we signed in December. We have regulatory clearance, commencement in February, and we got to plan of record in May. We’ve been coding like mad, sales, market teams working through their plans. And we are now in the testing phase, which is really significant.

We still have coding to do, there’s a couple more really significant releases that we have to do together before the paid transition can occur. But right now we’re in the testing phase.

We are well into the testing phase for algo, and we’re starting the testing phase for paid. I think what I said at analyst day, because I did show that one example from that, and that was we are continuing to progress right along our testing plan. A huge achievement on Friday, we got to 100 percent of a certain level of testing, and so far so good.

But the hardest work is still in front of us, but if you just think of it, we’re chipping away week by week by week.

That requires all this complexity to work, right, because a query has to come to Yahoo, we’ve got to send it off through Microsoft’s API and we’ve got to get the results, and then we’ve got to put all of our other stuff around it and deliver the whole page experience.

BOOMTOWN: In speed.

MARK MORRISSEY: In speed, that’s right, that’s right.

BOOMTOWN: And you’re also testing the advertiser experience.

MARK MORRISSEY: Right. They’re separate, okay. We are going to run bucket tests of them together and separate, as you’d expect, but the actual traffic switch can be done separate, algo versus paid.

Right now we’re in the testing phase, and it’s going as well…it’s going better than I had hoped it would go. I mean, it’s not to say that we are in the clear on this, but, in terms of ramping up that process, checking off our weekly milestone, the testing process is going really well so far.

BOOMTOWN: And the people at Yahoo in that area are pleased with it? Because they’re again the customers in a weird way.

MARK MORRISSEY: We have a lot of work to do, too. I don’t want to make it sound like we’re all just customers here, but yeah, I mean, like we were skeptical about how quickly some of this work could get done, how quickly the relevance numbers could get achieved. We were confident Microsoft was the right choice. And it’s so far, so good. The things are working as we had hoped. Relevance is really good. I said that at analyst day the relevance is really good, and we’re cautiously optimistic.

BOOMTOWN: And the other thing that’s interesting to me now is the thing that Google can’t search, and neither can you is a lot of the people data in Facebook and all the social networking sites that get very deep and complex.

GREG NELSON: Part of your question about the future of search may be more a cooperation, really driven by consumer demand for those parts of the Web to become more open, which would be great.

There are some companies that don’t necessarily want to participate, but if consumers either vote with their feet or apply enough pressure, that that stuff should open up.

At some point maybe it just becomes overwhelming. You know [Yahoo Chief Product Officer Blake Irving], who’s now at Yahoo. One of the things he worked on really hard here when he was at Microsoft was interoperability between our two messaging platforms.

There is an example where really the consumer value is very obvious, very powerful, and eventually it broke through. You may find the same in the sort of non-crawlable parts of the Web, because when people think of search-oriented, keyword-based navigation of information as something that they expect, if you can’t get to some type of data through that, they may just stop using it, because it’s too inconvenient.

MARK MORRISSEY: I think that’s kind of the point I was trying to make earlier is that the search experience has to evolve significantly.

And I’ll call it the traditional search if the consumer knows exactly what they’re looking for, and they’re going to go through page after page of results. That’s yesterday’s search game. Search is more navigational now, it’s definitely more social, and helping users to find information that they’re looking for in a more natural way, rather than just a query and going through pages of blue links. We think that’s really critical.

By leveraging Microsoft’s huge investments in I’ll call it the traditional aspect of search, that always has to happen, right, the indexing, the crawling and the ranking is huge, hugely important, and useful, absolutely, and then layering on top of that two companies really focused on evolving the future of the search experience, and each of us having our own skills.

GREG NELSON: Just getting back to sort of what people want or what they expect, I assume you saw some of the research that we did when we were designing Bing. It’s something like over 60 percent, something like 65 percent of search sessions are unsuccessful.

So, the future of search is not just improving relevance, but also bringing people the answer so that your percentage of sessions that are successful goes very close to 100 percent, and the amount of time that you spend in that navigational part of the session has to get smaller and smaller and smaller.

The decision engine sort of positioning, the thing that led us in that direction was that very long term bet that you can understand the intent of the user, and then translate that into a different form of relevance, and you can serve up increasingly rich, not links, because links are just a way to end up somewhere else that you may not know anything about, but serve up high quality, credible answers or results or experiences, without having to navigate out of the search paradigm.

MARK MORRISSEY: To me when we talk about experiences, it’s that. It’s not just a query and results, it’s leading the user through the information that they’re looking for.

A big driver for the decision that we made in the partnership with Microsoft is to allow us to focus on that.

GREG NELSON: There are a whole lot of premium opportunities that are available to Yahoo.

We have a lot of things that are in the core API, we have a lot of things that can be put in the API.

And so Yahoo can form their strategy about what they want to do with the user experience, and we have a lot of things to do too.

The thing that’s been fun for me, and you know this by covering MSN, too, is you step into the search discussion at Microsoft at any level of the company, and you feel the level of focus and energy and forward momentum. Because when this company gets really serious about something, you really feel it. I mean, you felt it in Windows and Office and Internet Explorer. And now you feel it in search. Both the product experience like Bing but also at the platform level.

It’s fun. Like as someone that has spent 15 years now, I just had my 15th anniversary a couple weeks ago…

BOOMTOWN: What do you get?

GREG NELSON: You get a big piece of glass.

BOOMTOWN: Really?

GREG NELSON: Yeah.

BOOMTOWN: Like a vase?

GREG NELSON: No, like a big monolith.

BOOMTOWN: Really?

GREG NELSON: Yes.

BOOMTOWN: Nice.

GREG NELSON: Come over to my office and I’ll show you.

BOOMTOWN: Okay. [Laughter.]

GREG NELSON: But, I mean, the focus that you feel there, for somebody that has worked on a part of the business that’s less strategic, has been really fun, really energizing, and just great to work on.

MARK MORRISSEY: And that’s been proven out as we’ve worked through step by step through the things that we’ve needed to do. There hasn’t been a time where they’ve said, no, we’re not going to invest to go get that stuff. There has been clear focus at every level of the organization. And again the quality of what they’ve produced so far–not that they’re done, there’s a lot of work still left to go–but the quality has been fantastic. And I have looked forward to the future stuff that we’ve started to talk about here.

BOOMTOWN: Who do you actually report to?

MARK MORRISSEY: Carol.

BOOMTOWN: Carol, directly.

MARK MORRISSEY: Yes.

We sat down when she asked me to take the job, and she decided she wanted to have direct engagement.

And then clearly because this role spans across each of the different functions, our entire search business is what we’re changing in order to facilitate that.

BOOMTOWN: So, you’re up here [in the Seattle area]. You’re up here, what, every week?

MARK MORRISSEY: I live in southern California, because I started with Panama.

BOOMTOWN: So, you come up every week?

MARK MORRISSEY: Yeah, yeah, at least once a week. And generally it’s Thursdays is when we have our joint operating team meeting.

GREG NELSON: Yeah, if you want to buy airline stocks, like Alaska (ALK) and Southwest (LUV), I mean, between our leads going down and Yahoo’s leads coming up, wow, it’s amazing.

MARK MORRISSEY: When we have a center of operation for decisions tend to be here a little bit more, but that when you get down a level and we’re into each individual team’s discussion, like the algo team, their big meetings are on Thursdays, and they switch back and forth between here and the Sunnyvale area.

GREG NELSON: A lot of what we’re working on right now is engineering migration; we try and put Mark in the rooms with engineering leaders and whatever.

BOOMTOWN: Right, okay. And then you’ll continue to do that right through the…

MARK MORRISSEY: As long as it’s needed.

After months of trying, BoomTown was finally granted an audience with the two key execs who are now responsible for one of the diciest digital jobs going right now: Microsoft’s Greg Nelson and Yahoo’s Mark Morrissey.

The pair’s two-year task is to coordinate the massive search and online advertising partnership the companies struck last year, a job that is perhaps one of the more complex and critical to their businesses going forward.

The deal was finally approved by government regulators in February, and that started the clock for Nelson and Morrissey to get it cooking with gas.

Although it is not as if either Microsoft (MSFT) or Yahoo (YHOO) had a choice but to join together in order to make a dent in the dominant market position of Google (GOOG) in search, the companies are hoping their combined share of close to 30 percent will make a difference to both advertisers and consumers.

The integration will be ongoing, with hopes that the U.S. market will see a unified backend for search technology by the end of the year. Paid search will follow, as will the rest of the global markets.

As part of the shift, some staff from the Yahoo search technology group have either left, been laid off or have been moving over to Microsoft in the transition.

That has meant a Silicon Valley-to-Seattle area back and forth commute for Nelson and Morrissey, both longtime employees who have worked on a variety of other jobs at both companies, including heading MSN and major advertising platform initiatives, respectively.

But this effort is bigger than any of that, since it essentially is the search equivalent of herding cats–by creating a seamless search and online advertising product that works quickly and well across two major Web properties.

Thus, here is the first of two parts of an edited transcript of much of my hour-long interview with both, in which we talked about a range of issues from operations to culture to codependency.

Part Two of of the interview is posted here.

GREG NELSON: So, you want to hear how I got into this thing?

BOOMTOWN: Yeah…explain it to me.

GREG NELSON: So, you know me from the MSN days. And [Microsoft search head Qi Lu] said, “I like what you’re doing with your team, but I have this assignment. And I said, “Qi, I really respect what you’re trying to do. I don’t know if I’m the right guy for you, but go ahead and talk to everybody you want to talk to. And if you come back and ask me to do it, I’ll say yes.”

So, he went out and interviewed a bunch of people and then came back and said, I want you to do it. That was hard, because I loved my MSN team, and I loved what I was doing. But, you know, when Qi asks, you say yes.

BOOMTOWN: Had you been doing any search business?

GREG NELSON: Well, only through the MSN lens. I was a publisher in a way, because I had the responsibility to drive search volume through MSN as a publisher. So, I would work with our editorial staff in all these different markets to think about search experiences in the context of a portal or a media property, and how you turn search into content or how you drive premium content experiences that add value to search, whatever it might be.

So, I thought about it only from that point of view. The algorithmic part of search, like the way that you generate relevance in search, the way that you attach it to advertising in search, that’s sort of my…that’s what I get to learn out of this job, which is great.

MARK MORRISSEY: When he started, both of our executives got our top level teams together. We wanted to be really on the ground running by the time they got regulatory approval.

GREG NELSON: Just to give you a sense of what I walked into, there were hundreds…I don’t remember exactly how many, probably 200 people that had expressed interest in working on that Yahoo partnership by the time that I was asked to take it on. And they were people from all different parts of the company and division; not necessarily all at senior levels, but people that had said, “Wow, I think that’s really interesting, I’d like to come work on it.”

So, I went through a review of all those resumes and all that talent, and then also did additional sort of looking around and picking people one at a time to build what we thought we would be a great team.

BOOMTOWN: And how many people are working on it from Microsoft?

GREG NELSON: All up?

BOOMTOWN: Yes.

GREG NELSON: Thousands.

BOOMTOWN: No, of course, but…

GREG NELSON: Yeah, I mean, there’s about 25 on my team, 25, 30, something like that.

MARK MORRISSEY: But even after you got your team together, one of the things that we’ve continued to do is find some key talent at Yahoo that has moved over to also be part of the Microsoft team.

GREG NELSON: That’s been really key.

MARK MORRISSEY: Yeah. So, we want people that really understand the search business and have extensive experience at Yahoo and can really help bridge not only the cultural differences, but the technical differences and the way we’ve approached the market.

BOOMTOWN: You’ve done a lot of these.

MARK MORRISSEY: So, yeah, about five years ago, they brought me into the product portion of Panama….And then that’s probably the closest comparable effort in the industry, because we did have to move our 400,000, plus or minus, global advertisers over from the platform over to Panama.

When [Yahoo CEO Carol Bartz] came on board, she asked me to be part of a small team that worked directly with Microsoft from the very beginning to figure out what the right thing was for us to do at the company, and obviously then to do…figure out what the right aligned incentives and the right structure would be for a long term, 10-year, global agreement between the two companies.

So, I did that, and that was a big portion of my responsibility last year. And then similar to Greg, as soon as it became clear that we were going to get an agreement signed sort of in the October timeframe, maybe a little bit sooner than that, Carol sat me down. I had another position in the company, and she said, it’s the right thing for you to do, and she asked me to do it.

So, she asked me to take on this role, and I just have had a long term affinity for search and search advertising. I wanted to make sure with all the work that we did on Panama and all the investments we made in search that we really ended up with the right future. Search is critical to Yahoo’s future, and yet we’ve got to make sure that we do this transition in a way that really puts us forward of all of our different customers.

BOOMTOWN: When you say Yahoo’s future, how do you look at it in search?

MARK MORRISSEY: It’s a critical part of our business today, and a critical part of our consumer experience, and it always will be. What the market deserves is it really needs a true alternative to Google. And the best way for us to achieve that is to acknowledge things that we do well, and the things that Microsoft does well, and to leverage those things together, as opposed to us trying to do everything ourselves, particularly in the areas that we’re maybe not so good at.

So, between Microsoft’s experience and focus on delivering great global platforms with true scale, Yahoo’s strength in terms of working with advertisers and understanding of the market, I really believe that in the mechanics we set up from the very beginning of this that by leveraging both of our strengths, that we can really deliver a true competitor to Google.

Not only does our scale combine to really give them much better liquidity that is huge, right, getting up close to 30 percent in the U.S., big, but then the focus that we have really helps out.

[We're not going to be in] the search platform business, the crawling, the ranking and the indexing of the Web. There is a lot of search-related technology that we’re still going to do, because we believe that the search experience…where the market needs to go for search, it’s still a relatively young market, at least from my perspective. But the search experience really needs to evolve significantly.

So, rather than us with less resources than what Google or Microsoft have had in the past trying to do all the back-end platforms and do search experience, now we’re going to take our best talent and focus on search experience and the overall consumer experience.

And then some of our talent is moving over to Microsoft. There’s about 400 people in the products organization between the search technology and paid search that are moving between Yahoo and Microsoft.

BOOMTOWN: And how successful have you been recruiting those [to Microsoft]?

GREG NELSON: Oh, really. Yeah, very successful.

BOOMTOWN: And they’re staying down there [in Silicon Valley]?

GREG NELSON: Yeah, most of them are in India. Some of them are in Silicon Valley, and other places. We’ve had a super-high acceptance rate.

So, we’ve made that quite a big priority, including a lot of executive visits, and a lot of kind of, “Hey, welcome to Microsoft, we’re excited to have you.”

BOOMTOWN: So, then you brought up over about 400, is that right?

GREG NELSON: They come in waves actually, because Mark had talked about Panama, if you want, but they still have to continue to run Panama over a period of time, across all these different markets.

So, as they are closing down Panama in various places, then we’re bringing waves of employees over and training them on adCenter.

MARK MORRISSEY: And that was one of the things that really started to demonstrate and build a lot of confidence in the execution portion of the partnership. There’s two very competing objectives: Get the employees over as fast as you possibly can, because getting that talent into Microsoft not only puts more key talent on developing the things that we need to have done for the future of the platform, but also helps in just the transition itself.

And yet we don’t want to move the talent so quickly that we’re not able to continue to the platform all the way through.

So, we went through a very rigorous…I think it took about five or six weeks with the senior leadership at Microsoft on what employees can go in what locations with what skill sets to allow us to balance between the two, and I thought it went fantastic.

Employees are engaged; the Microsoft team did an excellent job of helping to explain their level of investment and give those employees…because employees, they want to beat Google, and knowing that they have a future at a company that is going to invest significantly to make that happen was a big deal.

BOOMTOWN: And, Greg, when you’re saying, when they move over, there’s not a flipped switch, I understand that, but what’s the time line at this point?

GREG NELSON: I think we’ve brought over 100 or so.

MARK MORRISSEY: A big chunk went last week.

BOOMTOWN: When does it switch over?

MARK MORRISSEY: Beginning of next year.

BOOMTOWN: The U.S. moves first and then…

GREG NELSON: Yeah. Well, U.S. and Canada, North America.

BOOMTOWN: Right, and then? Then the rest of the world?

GREG NELSON: You can kind of do it by size of market. So, Europe next.

MARK MORRISSEY: Basically, there’s 59 total countries and the objective is to get all countries done by Q2 of 2012, the first few markets being U.S. and Canada.

GREG NELSON: It’s 24 months after commencement, which is February 18th.

BOOMTOWN: Right, but it begins next January, correct?

MARK MORRISSEY: The principle is to transition with quality. That’s the overriding factor. And that’s based on the consumer experience and the yield and performance of advertisers and publishers in our owned-and-operated properties, right, because the intent here is make sure that, as we make the transition to going forward, we want the business results to get nothing but better and better.

We set a goal for both of our teams, if we can possibly move U.S. and Canada over before the holiday season, with quality, this year–this year, we want to do so.

BOOMTOWN: Quality, what does that mean?

MARK MORRISSEY: The first one is the experience. For consumers we want to deliver the same quality experience–basically the look and feel before and after the transition.

And the results will get nothing but more and more relevant over time. But the overall experience, the speed, the performance need to be as good or better going forward. For advertisers, there are capabilities that they’ve really enjoyed in Panama that are not in adCenter today. We’re not promising them one-for-one capabilities, but there are investments that we’re making together with Microsoft to bring adCenter up for advertisers and publishers.

In terms of the first one is experience–experience for consumers, advertisers, publishers, and we want the capabilities to be what they expect or better.

Then secondly, it’s around the business metrics….We want to make sure that again for not every single advertiser, not every single publisher, but if you look at in aggregate the groups of major marketplaces, we want the overall performance and business metrics, particularly going into the holiday season, it needs to be as good or better going forward.

So, quality is about the experience itself, measured probably in terms of capabilities, and then there’s the business metrics, and we need to make sure that their yield is as good.

GREG NELSON: And there’s great alignment on that. It’s a 10-year partnership at minimum, hopefully longer, and you want to get off on the right foot with everybody: Consumers, advertisers, publishers. You want them to feel like this is a strong launch, it’s a credible alternative, and we’re in.

So, we’re not going to rush it. If the companies don’t feel ready, like we can really achieve that, then, of course, we’re better to wait.

BOOMTOWN: Well, there is some pressure.

GREG NELSON: The time line that we started to communicate to–publicly, specifically–our advertisers and publishers, is our goal is to have, you know, as pretty confident, algo transition, U.S. and Canada, will happen this year.

We want the paid transition to happen this year, if we can do so with quality, before the holiday season. We’ve got to protect the holiday season at all costs here. And then the next big part of the goal is we have to have it all done by Q2 of 2012.

So, right now we’re finalizing with each of our markets what that sequence will be in terms of the countries, starting in the first quarter of next year, and then we just roll all the way through to that last year.

BOOMTOWN: And how have the cultural changes [been managed]?

GREG NELSON: It’s interesting, because, of course, walking into this I had sort of a point of view and some apprehension, like “Wow, is this going to be really hard.”

It’s been far easier than I had expected, and I think part of that is just that Mark and I get along very well. We’re both kind of pragmatic and it takes a lot to kind of get us ruffled. So, I think we have similar styles. And the people that we’ve hired, we’ve really focused on finding people that are resilient and emotionally mature, and it will sort of steer something of this complexity over a long period of time.

So, I think you often read about, oh, Microsoft has this one culture, Yahoo has another. In practice, at least between these teams, I haven’t found that to be true.

MARK MORRISSEY: Well, right, and the interests here and the incentives that sort of reinforce those interests are very aligned. The way that the partnership was put together, we all have this one big goal, and we’ve hired people that are just really strongly committed to getting that done, and you have support from both companies at the CEO level down. It’s the top priority for both companies. It’s been far easier than I thought.

BOOMTOWN: But in terms of disgruntlement at Yahoo over not being in search technology anymore, how did you cope with that?

MARK MORRISSEY: So, first, we are in search, we’re always going to be in search. There’s an element of that particular part of the search technology that we’re not going to be in. Yeah, there were some disgruntled employees, there always will be when you make a hard decision.

But, in general, employees have responded very well, and the level of commitment that we’ve seen from the Yahoo end, work that we have to do, because this is an extraordinarily complex transition process where we have to connect our front-end to Microsoft’s back-end, and it’s got to work at tremendous scale.

I don’t know if you had a chance to see my presentation from investor day, but one of the things that I showed was some of the screenshots of what we already have in test. February wasn’t that long ago. To have gotten regulatory approval for us, to get through the mountain of requirements and use cases that we had to figure out, to have gotten the API, agreement on the APIs, and to get the coding behind those APIs and get into test by June is phenomenal.

It’s really just a long way of saying that doesn’t happen unless the Yahoos that are working on this are incredibly committed to the future of where Yahoo is going, and the future of working together with Microsoft to achieve this objective.

So, while there will always be disgruntled employees, if you look at the larger population, I mean, we have people that are not just working, they’re working unbelievably hard to make this happen.

BOOMTOWN: Now, the search experience teams are competitive teams.

MARK MORRISSEY: Some are competitive and there are some places that we’re working together. It’s a mix of both.

BOOMTOWN: Such as? Bing has been very impressive in terms of their innovation.

MARK MORRISSEY: Absolutely.

GREG NELSON: Right, and then there’s a separate conversation which is longer term, and, you know, it’s the sort of thing that would feel great to work on if we could do it right now, but right now we’re sort of just trying to ship.

But, both companies have unique assets that we’d love to put into the search alliance, and we want to drive that conversation. And right now we just want to make sure that we get Yahoo to parity of their existing experience, and then we also want to have that conversation about how do we build strength.

MARK MORRISSEY: Another way of looking at it is this is the first agreement in the industry where we have full parity in the platform.

So, as Microsoft invests in innovation around the experience, that’s going to require changes in the platform. As Yahoo invests in things that we want to do in the search experience, that will require changes in the platform. So, we’re always going to meet in the middle at the platform anyway.

Now, that’s not to say that every single thing that we decide to do around entertainment will be the same things that Microsoft decides to do. Some of the things we want to innovate independently, because we’ll discover more things and really move the ball forward. But we already have established a very strong working relationship around how we make those platform decisions, because there are things that Yahoo does today that are quite different than the way Microsoft does them today.

In order for us to get to that comparable experience, this could have been a fight to the death, right? Why would we want to do that in the Microsoft platform? And they’d say, well, “No, we don’t want to do it.”

What we did–and again I think it speaks to the maturity of both of our teams–is we just worked through use cases. Well, what are consumers really trying to do here, how has Microsoft been approaching solving that problem, how is Yahoo doing that. I thought we worked not just agreeable solutions, but ones that moved the ball forward for both of us.

But I’m anxious to get into those future conversations much more. But right now we’ve got to ship.

GREG NELSON: That’s the next chapter. The chapter right now is everybody’s head is down trying to just land Yahoo properly on the platform, and with the great equivalent searching experience.

BOOMTOWN: And when you have complaints? [Microsoft is the] vendor essentially and [Yahoo] the customer.

MARK MORRISSEY: The structure of the agreement, we really worked hard. This goes way back to the very first discussions that we had. We wanted to have aligned incentives where we set up this codependence that kept us really working well together through each of our respective roles. So, by and large, the issues or concerns, why isn’t this working, why don’t I have this capability, you know, it’s Google does it this way…we are going to be a major voice of the customer to the Microsoft teams.

In the structure of the agreement we have both this operational rigor of how do we bring those things in, how do we make marketplace decisions, which are really important. They have the technology, we have the customer-facing piece–and then how do we make road map decisions.

So, throughout transition I have approval authority in Microsoft’s platform road maps, and then going forward then we have a way of we keep providing that type of input.

It’s not a typical vendor-customer complaint process, it’s much more of a partnership, but we each have respective roles where one of us is more the vendor and one of us is more the customer.

So, for the platform they’re more the vendor, we’re more the customer. For sales we’re the vendor, they’re the customer.

And that keeps us again this kind of healthy codependence. And again to leverage–that aligns with each of our strengths.

BOOMTOWN: Is there such a thing as a healthy codependence?

GREG NELSON: Just watch.

Greg Nelson (pictured here), who has had the thankless job of running MSN for Microsoft, has left that position and been given the even more thankless task of running the integration of the complex search and online advertising partnership struck by the software giant and Yahoo.

Microsoft (MSFT) sent out an internal email to staff about the move for the GM of MSN’s Global Media Group, which has already taken place.

MSN U.S. head Scott Moore is now reporting directly to MSN Corporate VP Erik Jorgensen. So will Brett Wayn, who has been working under Nelson on international coordination and who has taken over MSN’s international business on an interim basis.

Nelson’s counterpart at Yahoo (YHOO), according to sources, will be Mark Morrissey (pictured here), who is currently SVP of Products at the Internet giant.

The pair will have their hands full in what will ultimately be a two-year effort, sources estimate, to try to improve their competitive edge against Google (GOOG) in the search arena.

BoomTown’s title for the relationship: A Couple of White Geek Guys Sitting Around Arguing!

The role includes coordinating a massive shift of engineering talent from Yahoo to Microsoft, making sure ad systems are copacetic and most of all, smoothing over what is likely to be a number of bumps in the partnership.

To help make the frustrations less frustrating, there is a $50 million annual payment to Yahoo by Microsoft for three years, for unspecified “transition and implementation costs.”

At least 400 Yahoo employees will be hired by Microsoft, which will also provide funds for retention packages to keep 150 more Yahoos motivated during the transition.

The “Definitive Agreement” between the Silicon Valley company and the Redmond, Wash.-based Microsoft, which had been slated to be signed by Oct. 27, 2009, is about to be completed.

Then, as soon as regulatory approvals are in place, it will be showtime for Nelson and Morrissey.

Just after he got the job 10 days ago, BoomTown got the chance to chitty-chat a bit with Scott Moore (pictured here), the former Yahoo media chief, who is returning to Microsoft, where he will lead online content efforts in the U.S for its MSN online service.

Apparently, you can go home again!

It’s a touché tale because it feels like Moore was pretty much rehired by MSN exec Greg Nelson (also in on the conversation with Moore) to give Yahoo a wallop where it really will hurt–its powerful content business, one of Yahoo’s few bright spots.

And to add another layer of irony, Moore replaced Jeff Dossett, who replaced Moore at Yahoo (YHOO) after Moore suddenly left the troubled online company late last year.

In our conversation, Nelson began talking first about the continued commitment of Microsoft (MSFT) to compete in the online media business despite its lackluster record over the years.

“We are making a big bet with Scott because he understands the key themes for us, which is that this is a scale business,” said Nelson (pictured here). “We all have a conviction that Microsoft has what it takes to compete in that arena.”

Moore agreed, noting that “very few companies have the scale that Microsoft has and you look at the size of the audience and the tools and great assets we can weave in and you realize the possibilities as the market is changing.”

But that scale has not helped Microsoft so far, although Moore argued that it still has a chance as the online content landscape changes.

By change, Moore posits that the Internet is now shifting from being a place to get news and information to becoming a primary entertainment medium.

“You can see that phenomena is somewhat in social media, the idea that it is not only about entertainment, but about making all kinds of choices through the Internet,” he said.

Because of Microsoft’s large audience, which still lags behind Yahoo and Time Warner (TWX) online service AOL, Moore thinks it has the opportunity to leverage the distribution strength with a variety of entertainment partners.

But he said he is not ruling out more original content from Microsoft.

“Most of it is still aggregated content, but MSN also has to think about having stuff no one else has,” Moore said. “You can make it, license it or partner.”

Both Moore and Nelson said it is important that the small amount of premium content is special, such as Microsoft’s deal with NBC during the Olympics.

“It’s a pyramid with the original and premium content on top,” said Nelson.

That does not mean going too far afield though. “I think we have to choose a spot where we already have a large audience and then program to keep them coming back,” said Moore. “It’s not doing something out of whole cloth–that’s not the idea.”

That’s presumably the exact idea behind MSN’s launch of Wonderwall last week, a slick, standalone celebrity Web site (pictured here), designed to compete with AOL and Yahoo offerings.

Moore, who was involved with the creation of Yahoo’s top-ranked omg! pop culture site, was not part of the Wonderwall effort and he did try to tamp down the idea of going head-to-head with former colleagues at Yahoo.

“I have a lot of friends and a lot of great memories there, but it is also great to go back to my roots,” said Moore.

Nonetheless, he still managed to add that he wanted to get MSN sites to top status as soon as possible. “When I got to Yahoo it was not No. 1,” he said.

Nelson said Microsoft was committed to content, even after a history of less-than-stellar results.

“Ideas are free, and so it is all about execution,” said Nelson. “What is our level of conviction? How committed is Microsoft? Very committed, because it’s the future of the company.”

In an unusual homecoming and odd job switcheroo between two Internet execs, former Yahoo media head Scott Moore is returning to Microsoft to lead its U.S. content efforts, according to many sources both inside and outside the company.

Moore (pictured here) will become U.S. executive producer, responsible for leading the content and programming strategy for the MSN online service. He will return to Microsoft’s Seattle area HQ in mid-March and report to Greg Nelson, GM of the MSN Global Media Group.

Microsoft (MSFT) declined comment about Moore’s new job, but sources said news of the appointment will be officially announced Monday.

But a memo about Moore’s new gig went out internally to some of the MSN staff earlier today, sources said. In fact, the return of Moore had been widely rumored inside Microsoft, even though there were several other internal and external candidates considered–including another former Yahoo, one source said–for the job.

Moore left Yahoo (YHOO), which was first reported here, last November due to unhappiness over the turmoil at the company and also to pursue a start-up idea he had about a local news site.

Moore even talked about the idea on the record with BoomTown (see video below), just as he was leaving Yahoo’s Santa Monica-based Media Group. Since he left Yahoo for good in December, Moore has been working on his start-up plans and took time off to go on a safari trip to Africa.

(Here’s a link to Moore’s Africa photos, in fact, which are quite good.)

But with the economic downturn making it harder for new start-ups to get funded on good terms, a desire to be back in the Seattle area, where his children live, and a new effort by MSN to compete better in the content business with top-ranked Yahoo, sources said Moore felt the powerful job at Microsoft would be a terrific challenge.

In what is a case of Web exec musical chairs, Moore had previously been replaced at Yahoo–in a rushed appointment–by Jeff Dossett. Dossett came to Yahoo from, wait for it, Microsoft, where he had held the job Moore is now taking.

In that move, also first reported here, Dossett was given a different title at Yahoo than Moore, as SVP of the U.S. Audience Group (Moore was SVP of the Media Group at Yahoo).

When he first started talking to Yahoo, Dossett (pictured here) was actually up for a job to run business development for Yahoo. But Moore’s sudden decision to leave had his boss, Yahoo’s EVP of U.S., Hilary Schneider, scrambling to fill the post. Dossett’s experience at MSN made him the obvious choice.

Now Moore’s appointment puts the pair in head-to-head competitive positions in the online content business, a clash that has been consistently won by Moore, when he had Dossett’s job at Yahoo and Dossett had Moore’s job at MSN.

Moore should also be comfortable at Microsoft and move into his job more easily. Previous to coming to Yahoo in mid-2005, he was president of MSNBC.com and publisher of Slate.com. He had worked at Microsoft for a decade.

Moore will oversee Microsoft’s involvement in the MSNBC.com joint venture again, along with all of Microsoft’s domestic content programming, which makes up a bulk of its efforts in the area.

And with Moore back on board, how MSN will better compete with the content juggernaut Yahoo is–due to Moore’s efforts, in part, and one of the troubled company’s stronger units–will be interesting.

That’s because Yahoo’s news, finance, sports and other properties typically rank as No. 1 online by far.

Time Warner (TWX) online unit AOL has also tried recently to improve its content offerings and has gotten some traction. It recently upped the ante with its new MediaGlow online studio effort of niche blog sites.

At the very back of this pack, Microsoft has made innumerable efforts in the content space over the years, mostly unsuccessful–Underwire!, Mungo Park!–and has settled more into the aggregation model.

But it still has a lot of interesting original content efforts under way, such as an unnamed celebrity-focused site property it is reportedly launching within the next week with former Yahoo media exec–and Moore’s former boss–Lloyd Braun.

Ironically, Moore launched a Yahoo celebrity site, omg!, initially pushed by Braun when he was at Yahoo, which has been successful.

Here is the video interview I did with Moore at his Yahoo going-away party about his future plans. Below that is another one I did when he was czar of Yahoo content, in which he talked extensively about the future of content on the Web.

While BoomTown is still gathering information, it looks like longtime Microsoft exec Yusuf Mehdi (pictured here), who is now in charge of marketing, online audience business development and product management for MSN and the search properties, will get more added to his portfolio, including overall business development for the online properties.

Mehdi, whose current title is SVP of the Online Audience Business, could also eventually get purview over programming for MSN too, said several sources.

Both those business units currently (and somewhat inexplicably) report to Satya Nadella, the SVP who heads engineering for Microsoft’s search, portal and advertising platform group.

Nadella and Mehdi are the two key execs who report to Qi Lu, a former Yahoo tech star who was recently hired as president of Microsoft’s online services group

What that means for MSN’s Corporate VP Erik Jorgensen and the GM of its Global Media Group, Greg Nelson, who report to Nadella, is unclear.

But it appears that the Microsoft (MSFT) online group is essentially being split into two clear parts: Engineering, and business and content operations.

Advertising sales, which had previously been under now-departed Microsoft exec Brian McAndrews, has been moved to Microsoft’s centralized Sales, Marketing and Services Group, led by chief operating officer Kevin Turner.

The changes are interesting, given all the behind-the-scenes talks that are now going on between Microsoft and Yahoo (YHOO) and Time Warner (TWX) online unit AOL over their search and search advertising businesses.

Microsoft has been seeking to take over search for both Yahoo and AOL, with its CEO Steve Ballmer recently in talks with both companies, in order to give it a decent market share in its ongoing quest to compete with Google (GOOG) in search.

Right now, Google dominates that market with an over 70 percent share, while Microsoft has just under 10 percent.

Microsoft is announcing its second-quarter earnings today, and many expect it to also announce layoffs, due to the tough economic environment.

Why settle for less, when you can have the whole enchilada?

Thus, here is the entire MSN rejiggering internal memo BoomTown wrote about earlier today.

It was penned by Greg Nelson, head of the MSN Global Media Group, who reveals in it–interestingly–that he has not yet filled the job of U.S. Executive Producer of Microsoft’s consumer online service.

But it does outline a series of chair-changings at the unit, which has struggled over the years to make a dent in the consumer online space.

Also, a note to “note taker” at the Town Hall meeting next Tuesday at Microsoft (MSFT) HQ to discuss the changes, who is mentioned below: You can email me those meeting notes you are apparently taking here at kara@allthings.com and I promise not to tell anyone (well, to tell you the truth, I will tell everyone).

In any case, here is the whole memo:

From: Greg Nelson (MSN)
Sent: Friday, November 21, 2008 1:57 PM
To: Global Media Group Leadership Team; Worldwide EP Team; MSN Leadership Team; Online Audience Business Group FTE; Bill Shaughnessy Extended Directs; MSN US Media ALL
Cc: Erik Jorgensen’s Direct Reports; Satya Nadella; Yusuf Mehdi
Subject: MSN US Team

Team:

I am pleased to announce a new organizational structure for the US Media Group as well as the leaders who will fill these roles. I have spent considerable time with the US leaders over the past few months to hear their views on how to meet the challenges and opportunities we have, and I believe this leadership structure positions us for success in our near-term goals as well as our long-term strategy.

MSN US Media Leadership Team

The US Media Leadership Team will be structured as follows:

The group will be led by the US Executive Producer. I am evaluating a very strong field of both internal and external candidates for this role; until the role is filled I will continue to act as the interim US EP. Each of the leaders and teams in the structure share the overall network goal to grow network audience, engagement and revenue. But each has a unique commitment and responsibility toward that goal, as follows:

• Network Programming, led by Rob Bennett–This group will prioritize investments against Network priorities, shape audience strategy, set Network standards, and sponsor cross-network initiatives.
• Network Entry Points, led by Steve Cvengros–This group will focus on increasing exposure, distribution and discoverability of assets by optimizing and expanding entry points to the Network.
• Vertical Programming, led by Sandy Henson–This group will create content experiences to deeply engage the audience and grow Network value in vertical areas. All channels will move into this group.
• Monetization and Analytics, led by Dell Wilkinson–This group will focus on improving yield by making MSN easier for advertisers to buy and APS to sell through inventory insights and APS engagement.
• Chief of Staff, Eva Corets–This role is responsible for driving team processes and business rhythm, and assisting with prioritization of network projects and interaction with cross-division and cross-Microsoft teams.

In addition, Charles Tillinghast (President and Publisher of MSNBC.com) will continue to report directly to the US Executive Producer. The US Media Group will also have a close “dotted-line” partnership with Javier De Lucas and the US Planning Team and a new US R&D leader in the Global Market Delivery Team (to be hired). In addition to running the Global Business Development team for MSN, James McClamroch will also be a member of the US Media Group Leadership Team.

As I mentioned above, all of the channels will move into the Vertical Programming Team. I want to thank Lisa Tiedt, Mark Schnitzer and Scott Ehlers for their leadership of their respective teams, and for their contribution to the US Senior Leadership Team over the past 18 months. They remain an integral part of our organization and will continue to work with their teams and the new US Leads to ensure a smooth transition.

Next steps:

Each of the new network leaders will send follow-on mail soon to give more detail about their groups.

We will be holding an informal Town Hall meeting on Tuesday at 9:00 am in C/1089 to discuss these changes, for the leads to provide more details on their group priorities, and to give you a chance to ask any questions you may have. For those of you who are not able to attend, we will have a note taker and will distribute a recap after the meeting. In the meantime, please feel free to connect with your current manager, or any of the new leaders, to discuss any ideas and comments, or a specific interest you have in these newly defined areas.

Our goal is to finalize the new organizational structure quickly, while allowing enough time for the new leaders to sort out the remaining issues on how their teams work together and ensuring that each employee can be thoughtfully considered for new roles. I have asked the new leaders to make these design and employee discussions their top priority for the next two weeks, and we will send an update on our progress on December 17.

We plan to enter this new org structure in January (at which time we hope that office moves will be kept to a minimum). In the meantime, you will continue to report to your current manager and should keep driving toward your existing commitments. If you change managers in January, your current manager will be responsible for providing input to your mid-year career discussion and ensuring a smooth transition.

The US leaders and I believe this organizational structure will help us to deliver the best results for our business and offer great opportunities for our people. Even in our current challenging environment, it’s important to remember that Microsoft’s resource investment in MSN has never been greater than it is today. I’m inspired by the talent, passion and vision of the US team, and I want to thank you for your commitment to MSN.

Please join me in congratulating Rob, Steve, Sandy, and Dell in their new roles!

Thanks -
Greg

greg nelson . general manager global media group

Here’s part of an internal memo BoomTown obtained about some small, but interesting, changes at Microsoft’s MSN unit, sent out by the GM of its Global Media Group, Greg Nelson, which is under the leadership of–well, frankly–a confusing panoply of execs.

Essentially, Nelson now reports to Satya Nadella, SVP of the Search, Platform and Advertising Group (think engineering and search) and Erik Jorgensen, Corporate VP of MSN (think business and other stuff).

In addition and apropos of nothing, Yusuf Mehdi serves as SVP of the Online Audience Business and Brian McAndrews is SVP of the Advertiser & Publisher Group.

Also, there is a Windows Live group that does mail, communications and groups too, and a lot of other digital bosses too numerous to mention.

You can see why I have been haranguing Microsoft (MSFT) CEO Steve Ballmer for a little digital clarity, especially around its consumer digital businesses and brands. But Microsoft–like a lot of tech-born businesses–loves to overdesign!

Ballmer has been searching for an overall head of that business to sort it all out since Kevin Johnson left in July, whose massive duties were divvied up.

While he has looked at a lot of execs from inside and outside the company, I recently posted that Ballmer’s latest quarry is former Yahoo tech star Qi Lu.

Only Ballmer knows for sure, many have told me, keeping his decision-making on the issue close to the vest.

But, as many insiders and outsiders familiar with the business have noted to me, whoever takes that role as its digital guru has some very hard decisions to make in all its arenas, from search to advertising to content.

There has been no share growth in search for Microsoft, for example, where archrival Google (GOOG) dominates, even as there have been billions of dollars of investment in data centers and engineers.

And it will fall to the person Ballmer ultimately selects as digital head to figure out what to do next.

Microsoft’s failed attempt to buy Yahoo (YHOO) was one way of dealing with the many issues Microsoft is facing, as well as its current interest in buying Yahoo’s search business.

In any case, here are some new changes at MSN, in Nelson’s words:

· Network Programming, led by Rob Bennett–This group will prioritize investments against Network priorities, shape audience strategy, set Network standards, and sponsor cross-network initiatives.

· Chief of Staff, Eva Corets–This role is responsible for driving team processes and business rhythm, and assisting with prioritization of network projects and interaction with cross-division and cross-Microsoft teams.