Google seems to want special treatment on Internet Explorer, according to Microsoft CEO Steve Ballmer.

His remarks centred on the default search engine in the Web browser. Right now, when people update their version of IE, the software won't change their default search settings. "If you pick Yahoo, it will stay on Yahoo," Ballmer said in a hallway conversation on Thursday, after a speech he gave at the Churchill Club in Santa Clara, California.

Google, however, has complained about how the system works. The complaints could be taken as a disguised way to help that company grow its segment in search, Ballmer suggested.

"Google wants us to prompt the users to change the defaults. They want to see a list of search providers, with the No. 1 search provider listed first," said Ballmer, who was speaking generally and not recounting a formal meeting or discussion with Google executives.

Sergey Brin, one of the co-founders of Google, used the "M" word -- "monopoly" -- to describe Microsoft at a press event on Wednesday and said the software maker didn't necessarily play fair in certain situations.

Google and the growth of the advertising market were one of the primary topics of discussion at the Churchill Club event on Thursday. Microsoft is third right now in Internet advertising. The Redmond, Washington-based software company hopes to turn that around by developing its own ad network to create a mass marketplace on the Web. It's also working on software tools and alliances with content providers and online stores to push the effort.

"We want to make sure there is good, healthy competition in the advertising space," Ballmer said. "Everybody deserves good competition. People have been telling me that for years."

Not every bit of technology will be supported by advertising, he said. Even though Microsoft will have ad-supported applications, a lot of people will want a standard desktop Office.

"Can you imagine writing a letter to someone," he said. "'Hey, Mom, I am upset with the gun policy.' Then an ad pops up and says, 'Hey, do you want to buy a gun?'"

The Microsoft chief spoke on a range of other topics:

• Ballmer likes social-networking site FaceBook. "I've spent a lot of time studying FaceBook. I think there is a lot we can learn from the FaceBook concept."
• As for file-sharing service BitTorrent, it's "very interesting, but I'm not sure where is goes as a business," he said.
• Ditto for YouTube. "It's fascinating. Anything that can capture consumer interest like that," he said. But it remains unclear how to turn the video Web site into a business proposition.
• Microsoft will continue to buy start-ups, of which it bought 22 last year, he added.
• Open source keeps Ballmer awake at night. Right now, Microsoft trails the open-source community in software for high-performance computer clustering and some other server technologies, he acknowledged. But future versions of Windows will try to close that gap, he said.

The competition between Microsoft and Linux is based mostly on technology and not philosophical differences. Ultimately, that helps Microsoft, he indicated, because it then becomes a battle over features.

"We looked at open source and said, 'Is this a religious competition? No, it is a good old-fashioned engineering competition,'" he said. "It is hard to beat open source for cost of acquisition. It is not hard to beat open source on total cost of ownership."

Microsoft, however, doesn't have a lot of interest in dipping deep into that area. "We can't embrace the open-source business model. That is inconsistent with being a commercial company," he said.

Ballmer also mentioned that:

• IBM remains one of Microsoft's biggest challengers in the corporate space. The competition comes either directly from Big Blue or from companies that have adopted its technology.
• Microsoft is still a growth company, he noted, saying that in the past five years, its profits have grown 80 percent. The company's percentage of the profits of the top 23 tech companies has also increased, from 18 percent to 23 percent.
• The software maker won't likely see 20 percent growth because of its girth, but 8 percent to 10 percent annual growth is realistic. "I think our numbers are pretty good," Ballmer said.
• The Vista update to Windows and the upcoming version of Office will cost about the same as current versions once they are released. The student/teacher version of Office will also be folded into the home edition.
• Microsoft's secret weapon? It doesn't sleep. "We have a tenacity and a persistence and patience to stay after it and stay after it and stay after it," Ballmer intoned. The company, he added, is quite patient. Patience "is what distinguishes us from many technology companies that are important," Ballmer said.