Microsoft now is taking on Lu, who holds nearly 20 patents, to help rev up its battle with Google on the search and advertising fronts. Google's search business is projected to become larger and more profitable than Microsoft's Windows franchise sometime in 2009. Google has a nearly 65% share of the search market while Microsoft hovers around 9%, according to comScore.

Microsoft's Online Services Group, which includes its online advertising platform, Hotmail and instant messaging service, Live Search and the MSN portals, posted US$770 million in profit during Microsoft's fiscal first quarter of 2009, a nearly 15% increase over the same quarter in 2007.

With Lu's appointment, Brian McAndrews, senior vice president of the advertiser and publisher solutions group, will leave Microsoft. McAndrews, who came to Microsoft when it acquired aQuantive for $6 billion in May 2007, will serve as a consultant to Ballmer and Lu during the next several months.

Scott Howe, who was formerly with aQuantive and was vice president and general manager in the advertiser and publisher group was promoted to corporate vice president and will report to Lu.

Lu as the head of the Online Services Group (OSG) also will oversee the online audience business, which is managed by senior vice president Yusuf Mehdi; the research and development group managed by senior vice president Satya Nadella; and OSG finance, which is managed by Rik van der Kooi who was promoted to corporate vice president.