Popfly, Microsoft's mashup tool for non-technical users, has been released in beta form, CEO Steve Ballmer said yesterday.

During Ballmer's appearance on at the Web 2.0 Summit in San Francisco, a Microsoft staffer demonstrated how Popfly can be used to create applications for sites like Facebook and Windows Live Spaces, without the need to write code.

Popfly is built on Silverlight, a cross-browser, cross-platform plug-in for delivering video and applications. Silverlight is Microsoft's answer to Adobe's ubiquitous Flash technology.

While acknowledging that Adobe has done "a good job in rich media" with Flash, Ballmer nonetheless said there are plenty of opportunities for Microsoft to innovate as web applications "continue to get richer and richer."

Speaking at the same event, Adobe's CEO Bruce Chizen downplayed Silverlight's threat to Flash, saying Flash has been around for 10 years, is widely adopted and has a broad ecosystem.

Ballmer, who answered questions from conference chair John Battelle and from attendees, said that the clamour over web-hosted office applications like Google Apps and suites from Zimbra and Zoho as major threats to Microsoft Office is misguided.

In the communication and collaboration software space, Microsoft is focused on making its applications accessible in whatever way customers require, and that the issue isn't a black-and-white opposition between packaged and hosted software.

He acknowledged that Microsoft pays attention "to what the other guy is doing" and is receptive to implementing good ideas in its products.

As the interest in hosted applications rises, critics have said Microsoft has been slow in responding with a hosted alternative to Microsoft Office, and that it risks missing an opportunity that others are eagerly pursuing.

Asked if he was getting impatient with Microsoft's search and online advertising efforts, where the company lags far behind leader Google, Ballmer said he's confident his company will continue to improve in the coming years as it focuses on several key areas.

For example, Microsoft will continue improving its search engines, because they are key for generating ad revenues. It will also continue to strengthen its consumer communication services, like webmail and instant messaging.

Key as well is having a strong ad platform, which is why Microsoft spent $6 billion on aQuantive, and a strong ad syndication business, he said. Ad syndication will go through a major transformation in the next five years, as the focus shifts from matching ads based on a web page's content to based on users' online behaviour, he said.

Ballmer declined to comment on rumours Microsoft is buying a stake in Facebook, but he said the companies' existing online ad partnership is going very well.

He dismissed questions about the consistent speculation that Microsoft might buy the embattled Yahoo, saying Microsoft is confident in its strategy to at some point generate 25 percent of its revenue from online advertising. "We believe in our independent path. We like what we're doing," Ballmer said.

Microsoft also released a beta version of the Windows Live Photo Gallery photo management tool that adds publishing support for Yahoo's Flickr photo-sharing site. As of Thursday, the Microsoft product has a "publish on Flickr" option, in addition to its ability to post photos directly to the Windows Live Spaces blogging and social network. The Windows Live Photo Gallery is available on the Windows Live beta page.

Additionally, Microsoft provided an update on the adoption of Silverlight1.0, released a month ago. The number of partners in the Microsoft Silverlight Partner Initiative has grown to more than 50 organisations, and over 40 customers have delivered Silverlight applications.

Microsoft also said that Silverlight 1.0 is now available in 10 languages, including simplified and traditional Chinese, French, German, Italian, Spanish and Japanese.