GARFIELD: The digital world, from the PC to the internet, to the -- excuse the expression -- iPod, has altered our media behavior on a grand scale. But the marketing world has been very, very slow to catch up. Is the old paradigm the Titanic and are a lot of people gonna go down with the ship?
GATES: No, I think it's more evolutionary than that. The idea of creativity, great storytelling -- those things exist in the new medium. But you have to take advantage of the new tools and the new ways that you can do that targeting. And you'll see a little bit more turmoil in terms of who succeeds and who doesn't. But it's not some overnight cataclysm. It's year by year, particularly young consumers working in a different way, and there's a lot to be proven out here.
GARFIELD: It seems to me the old model was built both on the content side and on the marketing side by the mass audience and the new model was all about aggregating individuals or very, very narrow groups. Can you evolve from one to the other?
GATES: Oh, you can definitely evolve. If we know what 19-year-olds are watching, even if it's a thousand different things, technologically letting you buy the space to be on all 1,000 of those things will be as easy as it used to be to buy that single show that everybody was watching at the same time. And so, the ability to hit large numbers and even learn to get the feedback and how they responded to it ... did they click on something? Did they indicate favorability? Advertising will be less on the blind than it has been. So that means ads that really didn't work will receive less payment, and the ones that work well-that will be clear, and the people that get those will get more value.
GARFIELD: I couldn't help but notice that your half-billion-dollar introduction of the Vista operating system is taking place overwhelmingly in print and on broadcast. Is this a case of the cobbler's children going barefoot?
GATES: Well, the percentage of that marketing campaign that's digital is very substantial -- I think over 30%. And today when you want a big, big phenomena, you use all the vehicles that are available. A customer I work with a lot is Geico, who sells car insurance. And the internet has revolutionized their business-over half their customers are acquired that way. And yet they drive a lot of that traffic by having what's been one of the fastest-increasing ad budgets around, building their brand, building that association with great insurance value. And so for large-scale companies like Microsoft and Geico, it's very much a hybrid model.
GARFIELD: This is based on pretty much zero data, but it doesn't seem to me that either Vista's or Zune's campaign has so far generated a whole lot of buzz. Are they generating any business?
GATES: Vista's doing extremely well. Zune has gained a great No. 2 position as a product that's completely new for us. Vista's the most-used piece of software there is in the world, and so it has this incredible impact as people talk about how it simplifies things that they've done. We've seen a much stronger reception in terms of people upgrading the software, buying new PCs than we expected there. I think a lot of that had to do with how much we worked with users in advance and understood exactly what they were interested in.
GARFIELD: Tell me about your work with AT&T to develop IPTV (Internet Protocol TV) -- basically internet TV. What effect will that have on our consumer habits and what effect will that have on the broadcast industry?
GATES: Well, what we call IPTV is enabled by the fact that the internet has enough bandwidth to carry even high-definition video signals. So instead of getting just a broadcast signal that goes the same thing to every household, there's data over the internet that's targeted specifically at that TV set. And so if you're watching a news segment, the areas of great interest to you are made longer and the ones of less interest to you are made shorter. The sports you want are more in-depth, the weather you care about. Likewise, the ads are based on what would be interesting to you. So not everyone who's watching the news show is seeing the same ads.
GARFIELD: It seems to me that the online world is still kind of surprisingly two-dimensional -- essentially just a digital version of the video and the text from the old world order. Is there an online third dimension that truly exploits the digital space?
GATES: The richness of the web experience has a long ways to go. For example, when you shop online today, it is just a two-dimensional list of products. That'll change to be that you'll see a three-dimensional store that you can walk around and serendipitously see different, say, book titles and merchandise that may be of interest to you. ... In fact, one of the ways you'll get that is you'll go into what Microsoft calls Virtual Earth, and you'll just be walking around the downtown on your screen, and you'll see a store, you'll say you want to go in, and there you are looking at all the offerings that they have, whether it's an art gallery, bookstore, restaurant -- and that's a new experience. ... We can make the internet more engaging. It's the place where all the innovation's taking place, not back in the old broadcast approach, where the sets are fixed and everybody's got to watch the same thing.
GARFIELD: Advertising Age had a story this week about Bono's Red campaign. So far the campaign has cost $100 million among participants and generated, according to our story, $18 million. As co-founder of the Bill & Melinda Gates Foundation, which has donated many, many hundreds of millions of dollars to the same cause, what are your thoughts about the whole concept of branded philanthropy?
GATES: There's some pretty strange numbers in the question that you put in there. The Red campaign has saved lives, and there's something wrong about your cost number in there. ... Red is about saving lives, and if you -- if there's not enough money to buy drugs, people die, and so we can say, "Hey, let's just let that happen," or we can take all the avenues available to us, including governments being more generous -- and that's been a big thing -- philanthropy being more generous, and consumers and their activities, being able to associate themselves with saving lives. And the success of, say, what the Gap did or what Armani did or various things show that consumers do want to get involved in saving lives. And so anybody who says that hasn't been successful, that's, you know, pretty cynical stuff that I wouldn't agree with.
GARFIELD: I want to ask you one more thing: Those Mac ads -- how do you feel about the John Hodgman character?
GATES: I can't comment on someone else's ad.
GARFIELD: OK ... but he's you.
GATES: Yeah, I'm not gonna comment on someone else's ad.
GARFIELD: OK, well, Bill Gates, thank you so much for joining us.
GARFIELD: Can I just have a clean goodbye?
GARFIELD: OK, can you just say goodbye? Thank you or goodbye or something like that?