Sullivan asked the audience of a few hundred advertisers, marketers and consultants if any of them were "frustrated" with Google's behavior, and only one or two hands in the room went up.
Search will be a bigger share of Microsoft's business going forward, Ballmer said.
"I guarantee search is going to be a growing share of Microsoft's profits. That means it's first got to break even, then get bigger, but that's a growing share the way I do my math," he said.
The biggest opportunities in search are in divining user intent and helping them complete a task, he said -- something Google and Yahoo are also working on. He gave the example of his own frustration trying to gather data about debt as a percentage of countries' gross domestic product.
"I knew what I wanted, I could have drawn an Excel spreadsheet and I just wanted to search to get the data to put in the spreadsheet. That shouldn't be that hard," he said.
Microsoft will keep investing in Cashback, a program in which Microsoft pays partial refunds to customers who make purchases through sponsored links on its site. But the company might make some changes while keeping the basic concept intact. "It hasn't worked fantastically, in the sense it hasn't completely changed the economics of the business. But it has certainly had positive results, so I'd expect us to continue Cashback."
Microsoft seems to have learned something from the privacy backlash that hit Google Buzz, its social networking project. Privacy is "a lot more in our mind post the buzz around Buzz," Ballmer said.