What is Microsoft Cooking Up In Its New Lab?

Microsoft (NASDAQ:MSFT), having dropped a little behind as competitors raced to innovative products, is falling back on sustained research to help it come up with exciting new ideas. The company’s presence in social networking and even data-rich devices like smartphones is fairly insignificant, but it is now making a concerted effort to change that, and to better understand user behavior.

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Microsoft’s new research lab in New York houses economists and machine learning experts who have been asked to enhance the company’s engineers’ understanding of social media interactions. The lab has not been tasked with creating any specific products, but is rather a think tank that Microsoft hopes will come up with ideas that could potentially result in new products somewhere down the road. Interestingly enough, the lab has several scientists who were formerly at Yahoo (NASDAQ:YHOO), which recently reduced its research staff as a cost-cutting measure.

Social network researcher Duncan Watts, algorithmic economist David Pennock, and machine-learning expert John Langford are some of the experts who have been transplanted from Yahoo, where they worked on similar projects.

Microsoft is hoping to utilize the fairly large portfolio of data sources it already has through services like its Bing search engine, Skype, and Xbox Live. “We have all these implicit social networks in Hotmail, Outlook, Xbox Live, and Skype,” Jennifer Chayes, the lab’s managing director, told MIT’s Technology Review.

Among the projects that Watts, who worked on identifying the structure of social links while at Yahoo, has already framed is the use of personalization by social networks and filters created by search engines.

That immediately brings to mind Google (NASDAQ:GOOG), Facebook, and Twitter, all of which have used such information to integrate functionality into their products. While Microsoft has trailed until now, the company hopes findings from the lab will help it catch up with companies like Apple (NASDAQ:AAPL) that have a years-long head start on innovation.

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