Lu, formerly Yahoo’s vice president of engineering for the Search and Advertising Technology Group, will take over as president of Microsoft’s Online Services Group on Jan. 5, Microsoft said. Lu left Yahoo in August after 10 years at the company.

In his new role at Microsoft, Lu will report to CEO Steve Ballmer. As Lu joins Microsoft, another executive in the OSG will be leaving. Brian McAndrews, the former CEO of digital advertising and services firm aQuantive and senior vice president of Microsoft’s Advertiser and Publisher Solutions Group, will transition out of Microsoft in the next several months, the company said.

Microsoft purchased aQuantive in May 2007 in a US$6 billion deal, the largest acquisition the company has made to date. McAndrews will consult with Ballmer and Lu during the remainder of his time at the company to smooth Lu’s transition to his new role, Microsoft said.

News that Microsoft would appoint Lu to take over its online business surfaced on the All Things Digital blog Thursday morning.

Lu will have his work cut out for him, as Microsoft has been struggling with its online business for some time. Growth of the OSG, which oversees Microsoft’s search and advertising business, has been flat to slow for many years, despite the significant investment Microsoft has poured into the division.

At Microsoft, Lu will oversee several groups, including the Advertiser and Publisher Solutions business, the group McAndrews is leaving. Scott Howe will take over as corporate vice president of that group, Microsoft said Thursday.

Microsoft also has promoted Rik van der Kooi from general manager to corporate vice president in charge of the OSG Finance group, another division of which Lu will be in charge.

Lu also will oversee the Online Audience business, run by Senior Vice President Yusuf Mehdi, and the OSG Research and Development group, run by Senior Vice President Satya Nadella.

Before his most recent role at Yahoo, Lu was vice president of engineering responsible for the technology development of Yahoo’s Search and Marketplace business unit, which includes the company’s search, e-commerce, and local listings of businesses and products.

Before joining Yahoo in 1998, Lu was a research staff member at IBM Almaden Research Center. Before IBM, Lu worked at Carnegie Mellon University as a research associate and at Fudan University in China as a faculty member.

Lu holds 20 U.S. patents and received his bachelor of science and master of science in computer science from Fudan University and his Ph.D. in computer science from Carnegie Mellon University.

Lu’s strength is historically as a technologist, which may explain why Microsoft is moving OSG’s field sales organization out of the group in the wake of his appointment. The company said Thursday the OSG field sales organizations will move to its centralized Sales, Marketing and Services Group, which is led by Microsoft COO Kevin Turner.

The new OSG sales group will be called Consumer and Online, and Microsoft Corporate Vice President Darren Huston will lead the group. Consumer and Online also will include the Global Advertising Sales and Services organization, which also had been a part of the OSG and which is run by Microsoft Vice President Bill Shaughnessy.

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