How Microsoft Razzes Apple Over Its Prices

She is an unlikely assassin—a cute young woman with long red hair, geeky glasses and a funky scarf. But make no mistake: Lauren De Long, star of a new Microsoft ad, is a flat-out killer. For three years Microsoft has been bullied by Apple's snarky "I'm a Mac" ad campaign, in which Macs are represented by a smart young hipster, played by actor Justin Long, and Windows PCs are represented by the dorky, dopey John Hodgman. Microsoft has tried to fight back, but its ads have been so bad that they only made Microsoft seem even more lame.

Now comes Lauren, a real-life hipster who looks like a stereotypical Apple customer. In the ad, which debuted March 26, a documentary-style film crew follows Lauren, who's been given $1,000 to buy a laptop and is told she can keep the change if she spends less. Along the way, she visits an Apple store, only to discover, to her dismay, that the only laptop she can afford is a last-generation model with a puny 13-inch screen. (She wants a 17-inch screen; at Apple, a laptop like that costs $2,800.) De Long's stinging line, delivered with a sigh as she's driving away from the Apple store: "I'm just not cool enough to be a Mac person." At the end of the spot she ends up buying an HP laptop for $700—and pocketing the $300 difference.

The ad makes an obvious point: Macs cost more than Windows PCs. But there's a far more damaging subtext: that people who buy Macs aren't necessarily cool, clued-in hipsters. In fact, they might just be poseurs who paid too much for a computer–slash–fashion accessory. The deeper subtext is that these days, wasting money doesn't make you hip and smart—it makes you stupid. In the age of the collapsing economy, frugality is the new cool.

Apple won't comment on the new Microsoft campaign. But on tech blogs, its fans are sneering that De Long's bargain-priced laptop is a piece of junk. They're even questioning the ad's premise: De Long, it turns out, is a part-time actress, which has led to charges the ad was, in fact, scripted. De Long has declined interview requests, which only fuels suspicion. However in an e-mail statement to NEWSWEEK, she insists, "I was completely unaware that I was filming a commercial." Microsoft also insists the ad was not staged, and they have a half dozen more of these real-life-customer ads waiting in the wings. In any case, the ugly attacks from Mac fanboys are exactly what Microsoft was hoping to provoke, says David Webster, general manager for brand marketing at Microsoft. He says the idea was to turn Apple's "I'm a Mac" campaign to Microsoft's advantage. "We associate real people with being PCs, [but then Apple] ends up looking pretty mean-spirited, the way they go after customers," he says. "It's clear that's who they are insulting." At the same time he can't resist taking a crack at the preciousness of some Mac users. "Not everyone wants a machine that's been washed with unicorn tears," he says.

The ads may be one sign that after a few bumpy years, Microsoft seems to be turning the corner. That's partly due to the bad economy, which is driving people to low-cost computers. In February, U.S. retail sales of Windows PCs grew 22 percent, measured in units, while sales of Macs dropped 16 percent, according to researcher NPD. Apple unit sales have been dropping since October, while unit sales of Windows PC have been growing over the same period, NPD says. Much of the growth comes from "netbooks"—those tiny, low-cost notebooks that are all the rage now. Most run Windows. Apple, so far, has refused to make one, though it's rumored to have one in the works. Instead, in January the company rolled out that 17-inch laptop with a $2,800 price tag. Talk about tone-deaf.

For Microsoft, the other good news is the early reaction to its new operating system, called Windows 7. I've been using a prerelease version for a couple of months, and it's terrific. It boots up much faster than Vista, which was one of the big complaints. There are far fewer of those annoying warning messages. The user interface has a slick new feature, a "taskbar" at the bottom that shows what apps you have open. The new system is due out later this year.

While Microsoft's engineers can be proud of that work, what amazes me most is that Microsoft's marketers—with much help from edgy ad agency Crispin Porter & Bogusky, which Microsoft signed a year ago—have finally managed to make a decent ad, something that I can't remember this company ever doing. Remember the print ads with office workers wearing dinosaur heads? What did those even mean? Microsoft's culture has always been about engineering, led by über-dweeb Bill Gates. And marketing just isn't very important when you have a monopoly.

It's clear Microsoft realizes it has found a winner with this low-cost message. They're running online ads where you spin two wheels—one for Apple, one for Windows PCs—and find out what the same amount of money gets you in each camp. In March, Microsoft CEO Steve Ballmer told a conference audience that people who buy Macs are "paying an extra $500" just to get an Apple logo. "I think that's a more challenging proposition for the average person than it used to be," Ballmer said. You'd almost think he's happy about the recession. At the very least he's probably hoping it hangs around a while longer.