Think of it as a consumer research project and then remind yourself the deals they've done with Facebook, Twitter, and Foursquare. They know how you search, how you socialize online, what's important to you, where you go, how often you go there, and more. The advertising implications are enormous if they can actually get ahead on using them in smarter ways that extend into your everyday life. Nadella admitted they have a lot to catch up on.
Now think of wearable devices, like the rumored Fortaleza for Xbox One, or perhaps an earpiece for your phone. If Microsoft knows what you like based on your Facebook profile, where you go based on Foursquare data, what searches are trending among your demographic, what you play, watch, listen to (don't get hung up on the service, they'll come and go with something to replace them) then they know how to target you. Advertisers will go nuts over that.
Fast forward years and years down the road and imagine smart environments that can recognize you, hear you, and respond to you, serving ads to your wearable devices that are relevant to your interests based on where you are currently located, knowing what you're into and your habits. If not you then your demographic from visual profiling. Think about self-driving cars in 20 years (it's going to be so much more efficient) and your windshield essentially being a display device that's showing info about your current location and ads about what's in the area, in addition to your music, game, or movie being served from an Xbox app
.
Like I said, the cloud, mobile, productivity, entertainment, and services markets are still very, very young. Microsoft has the resources, in cash, product, and talent, to be in your life while you work and play. They just need a visionary that will take more risks on innovative offerings and can lead greater execution, and that wasn't Ballmer.