While trailing Google badly in search has lots of disadvantages, it also opens some doors, says Steve Ballmer. And, he said, it's time Microsoft starts walking through more of those doors.

"We are going to have to be more disruptive," Microsoft's CEO said in response to a question at the end of a speech at Stanford. He pointed to Live Search Cashback as one example and hinted of changes to come in terms of the search user interface and new types of partnerships with content creators. Google has the economies of scale and the money to invest in more areas than Microsoft can afford to, he noted.

"We're not just a No. 2 or 3 player," Ballmer said. "The No. 1 player is a lot bigger than us." Ballmer said Microsoft can't afford to outspend Google in the search business or participate in each facet of the business.