What Works?
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There sure has been lots of buzz this week about Works 9. The ad-supported concept is supposed to be a big deal. Hardly. |
Ad-supported software is nothing new, not even for Microsoft. But this week's Works 9 rumor trail, which eventually led to Microsoft confirmation of an ad-supported version pilot, would suggest otherwise. Microsoft's free messenger software has had ads for years. Another example: Microsoft pushes out contextual ads to Windows Live Mail, the desktop software companion to Web-based Windows Live Hotmail. Microsoft's approach is similar to that of vendors of other ad-supported software products: Free users see ads, those that pay don't.
What's more amazing is that Works isn't yet retired and forgotten. It's not like Microsoft has put much development effort into the product since Version 8. Why should the company continue Works development, when the Office student edition sells gangbusters at retail? The two products share a similar target market. Besides, Office is Microsoft's cash cow, and there is a clear, margin-rich upgrade path from the student version to others. Works is more of a dead end.
That Microsoft still develops Works is more significant. The why—and the ad-sponsored approach is part of it—is more about protecting Office's soft underbelly than advancing some grand, new advertising scheme. I see three major objectives for Works 9:
- To woo potential customers that would never buy Office.
- Competitive maneuvering against Corel and Web-based alternatives like Google Docs & Spreadsheets.
- To provide a new low-cost product for emerging markets.
Consumers' Office Suite retreat
Go back six or seven years and Office seemed to be available at a fairly low cost on just about every PC, particularly after Office XP Small Business Edition was released. Later on, Microsoft took a different approach: OEM preinstalls of Office 2003 Trial, which have a fairly high conversion rate to the paid version. Office Trial conversions offer Microsoft higher margins than the deeply discounted full versions once regularly offered on new PCs.
Not everyone is going to pay to convert a trial to some version of Office, however. If Microsoft doesn't capture those potential customers, someone else will. There's a presumption that everyone uses Office—and maybe among enterprises that generalization holds true, but not among consumers or very small businesses.
A June JupiterResearch report revealed that only about 57 percent of U.S. consumers use Office for Windows, down from 61 percent in 2004. Meanwhile, the number of consumers with no productivity suite increased to 24 percent from 16 percent three years earlier. Among those consumers with no productivity suite, 61 percent said they didn't need one.
The data makes sense. Even without major competition, everyday applications commoditize major productivity suite functions. Blogging, e-mail, instant messaging, personal accounting and photo editing applications are among the many programs that offer basic word processing, including formatting like boldface or font changes and even spell-checking. Consumers will find no shortage of programs with word processing capabilities.
Quicken and Microsoft Money are among the products providing basic spreadsheet functions, but packaged with a nicer user interface. As for presentations, what kind of presentation needs would most consumers have, other than showing personal photos? The basic consumer slide show is filled with photos. No PowerPoint is required.
Those same consumers might easily use Works if it were free. Microsoft could drive revenue off advertising. A little ad revenue is better than nothing or consumers using competitors' products.
Microsoft Works' two battle fronts
Corel and Google present separate but related competitive problems for Microsoft. In February, Corel released Lightning, a lightweight word processor and file viewer that connects to the Web for additional capabilities, such as collaboration. Corel also uses Lightning as a mechanism for putting WordPerfect Office trial versions on consumer and small business PCs and upselling to the full product.
A low-cost or ad-supported Works would be competitive with Corel's products and possibly help Microsoft lock in the OEM market. Corel is a persistent gnat buzzing around the software giant. Corel has had some OEM success getting its software on low-cost PCs where Microsoft would like to have something. Works 9 could be it.
Compared to products from Google and other Web-based productivity application providers, Microsoft's ad-supported offering could provide the best of desktop and online productivity. In a July speech, Microsoft CEO Steve Ballmer said about Office Live, "The thing that exists today on the Web will be repositioned Office Live Small Business as we introduce more personal Office Live services."
What could those personal services be? Through my Microsoft grapevine, I've heard about a number of evolving scenarios—none of which is yet certain, but all of which are related. In one scenario, Microsoft would offer a hosted Works, or a Works-like product. That scenario would be hybrid, with some online capabilities available to complement fuller offline functions found in Office and or Works. A couple analogies: Outlook and Outlook Web access; Windows Live Hotmail and Windows Live. The Web versions make e-mail available everywhere, but the richer functionality is on the desktop.
In another scenario, Office Live would extend Office or Works capabilities by providing online collaboration and other tools not readily available to consumers. This is pure speculation on my part, but Office Online's next destination may be Office Live, as an extension of the personal services Ballmer alluded to. Either or both scenarios would be competitive with Corel and Google, particularly the online collaboration.
Microsoft does need to be a little concerned. Jupiter found that among the 24 percent of consumers that don't use a productivity suite, 4 percent gave as a reason, "I use online tools such as word processors or spreadsheets."
Still, report author Michael Gartenberg said he believes there are too many inhibitors, like offline access, for Web-based suites to really succeed.
"JupiterResearch instead believes that it will be hybrid models that will emerge, blending elements of the online and the off-line worlds, which consumers will ultimately embrace," he wrote.
Microsoft's Works and broader Office strategy is on a hybrid track.
Rest-of-the-world strategy
Ad-supported Works would be another means by which Microsoft could offer low-cost software in emerging markets. OEMs could bundle the software for free, while Microsoft would derive revenue from advertising. The approach could complement other low-cost initiatives, such as the recent Office 2007 rental pilot in Romania and South Africa.
Microsoft's global reach far exceeds Google's, in part because of the popularity of services like Windows Live Messenger and Spaces in world markets. Microsoft also can rally a network of over 600,000 partners. Seems to me that Microsoft's big AdCenter opportunity would be in emerging markets, where local search and contextual advertising could pay off over the long run. Microsoft has the wherewithal and vision to invest in an advertising opportunity that would grow slowly and reach crescendo much later.
Finally, ad-sponsored software, if Works 9 succeeds, could be Microsoft's solution to piracy in emerging and developed markets. Microsoft's big problem is casual piracy more than large illegal operations. When people share software, Microsoft doesn't get paid. But even if people share ad-sponsored software, Microsoft would generate revenue. Surely, the company wouldn't condone ad-sponsored software piracy, but there would be potential benefits, nevertheless.
Related Posts:
- Office: Go Smaller to Get Bigger, Microsoft Watch, July 30, 2007
- Microsoft Software: Rent Me, Microsoft Watch, July 20, 2007
- Microsoft Works in the Cloud, Microsoft Watch, July 11, 2007
- Will Lightning Strike Google and Microsoft?, Microsoft Watch, February 27, 2007
- Office Trial Could Cause Channel Conflict, Microsoft Watch, February 14, 2007
- Early Office 2007 Sales Exceed Predecessor, Microsoft Watch, February 13, 2007
- A Lesson in Office Student and Teacher Edition, Microsoft Watch, January 2, 2007
Comments (17)
Do you believe in conspiracies? Read this about how Microsoft treated patents as they dealt with Burst, Eolas and VCSY and I think maybe you'll begin believing that large companies (apparently ALL large companeis according to these Verizon supporters) all feel it's their right to take IP if the company is about to go bankrupt or they can be bullied into submission.
Boy have you guys got an awakening happening.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_M/threadview?m=tm&bn=12004&tid=1279647&mid=1279647&tof=1&frt=2
This is Like Pouring Salt on a Slug...
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_M/threadview?m=tm&bn=12004&tid=1279647&mid=1279879&tof=1&rt=2&frt=2&off=1
VCSY response to MSFT filing in VCSY v MSFT
Posted by Larry. L | August 3, 2007 4:54 PM
Greetings!
Works is really obsolete. I personally believe there is little to no need for software bundles you call "productivity suites". This packages almost ever draw the view away from the work (or fun) to do. There are better ways to write letters or essays, easier calculation tools etc. Everyday I have to see people spending there day with not getting things done using Excel. ("Where is that button...")
And if there is a need for a cheep office package, then for God's sake use OpenOffice or similar where there are no artificial feature gaps and no advertisement at all.
Bye
Roland
Posted by devcitizen | August 3, 2007 5:30 PM
Interesting thoughts Joe -- First things first, I tend to think of MS Works as a waste of time but only for the kind of people like myself, and OpenOffice is far, far from the reality (based upon my other posts) IMHO of course.
Devcitizen speaks or hints that Office 2007 is hard to use -- That's rediculous, I got into Office 2007 right when it came out. Sure the new look threw me off for a few minutes. I brought down the customizable tool bar and cranked on it. I realized there were some fantasic features that I unsurfaced. Yes in less than a day, I was into Access, Word, and especially Excel without a problem. I thought this arguement is weak anyway.
One of my jobs is teaching people new tricks, and MS Office 2007's new GUI is NOT A SHOW STOPPER and with a tad bit of time, you're gonna pick up on it and overcome your reluctancy quickly. Get over it -- Did people cry (a lot) when we made the huge jump from Windows 3.11 to Windows 95?
PAALEEEASSSE GET OVER THE RIBBON CRAP and its too hard to get through excuse. I teach 50, 60, and 70 year olds MS Office 2007 to the senior citizens up here as well as provide an IT business service and trust me, you can teach an old dog new tricks. These people are power users in these things and it cracks me up everytime I hear someone crying about the new look.
I used to hear arguements such as this and what I have found out, people ignorantly turn their nose up at things new, "Too hard to learn, too difficult to use." Nonesense, you'd still be living in a fricking dark cave.
For the Neaderthals out there, best stick with note pad, and how did they every get a computer anyway?????
Posted by Douglas S. Taylor | August 3, 2007 6:44 PM
The ridiculous Issue
Speeches about WORK is a jest, it is awfully poor. Because there exist plenty of other better choices for free.
The serious thing
I do have both Open Office as well as MS Office installed in my three computers (one notebook and two desktops), and I have found out I do not need MS Office at all (nor nobody in my household does). Open Office is plenty and enough for me.
Very relaxed, I can affirm MS will never take advantage of me again. Why do I say MS abuse or take advantage of us? Simply because MS has excessively profited its investment in Office (the lesser thing to say about).
Despite this, kept on charging us extremely high prices, extorting us on reason of its monopoly. Besides, do not forget, MS never showed a gesture of goodwill, such as: lower its prices or free up obsolete versions, it was all about putting the highest burden on us so it could become stinkingly rich.
For most users MS was a necessary evil, but it is no more (I do acknowledge there are some power users who shall have to carry on tolerating this situation yet, but please do not despair, the wind of change never stops blowing)
About compatibility I could not worry less. Is not MS the one concerned to get its MS Open XML accepted as standard? Times do really change!!! and I bet they will change even more.
Posted by Marco | August 3, 2007 7:28 PM
It is not my habit talk about myself or my family (I do not expect to do it anymore).
But I am graduated as well as my children, except my last daughter (whom is still in College). Therefore I consider if Open Office is enough for us, it would also be enough for most.
Perhaps I am able to afford MS Office, but why paying somebody who extorted me? More even so when now there is more to choose from.
Posted by Marco | August 3, 2007 8:06 PM
While OpenOffice is very good, I really don't need all the features that it has. And, I don't need something compatable with MS Office either. So while I use OpenOffice, for me, KOffice is another choice. Even Abiword, which is another open source cross platform word processor, is fine for just typing a letter, without adding pictures.
And, of course, I do not like the cost of MS Office, or its WGA features. I do understand the WGA features in MS Office are there to stop it from being pirated, and feel that MS has that right to protect itself. Just don't like the idea of software "phoning home" no matter what the reason is. And of course, there is the cost, why pay when you can get what works as well for you for free.
Then again, its mostly the word processor that I use, not the spreadsheet or slide show part of Office. So maybe I am not a power user, but I doubt most people are either.
When I learned computers my first Office Suite was MS Works version 4. I did not like it at the time and used PFS First Choice which was a whole lot more intuitive. After that I shunned any MS program if I could avoid them.
Posted by chips | August 3, 2007 10:38 PM
Why are you being extorted for MS Office? Do you have an inkling of how powerful that software is, and how much it has reduced in REAL cost over the years. When I was using Lotus 123 spreadsheet on an IBM PC 20 years ago, it cost more than ALL of Office does today.
If people were more concerned about software phoning home, they'd be on the back of all the OEMs who load up PCs with crapware that phones home whenever you log into your computer. At least Microsoft provides a verifiable entity and a checkable guarantee of anonymity when they do their phone-home checks. Do you think *any* of the garbage in your start-up folder does that?
Posted by Mike | August 4, 2007 3:01 PM
If you read my last post properly, you will find response to your question. A few clues for you to have:
"excessively profited its investment"
"extorting (abusing) us on reason of its monopoly"
"never showed a gesture of goodwill"
"putting the highest burden on us so it could become stinkingly rich"
However, at the same time I also have a question: is not is strange you cannot see the obvious (that thing that harms your family, your relatives and even yourself?) cannot you see the abuse committed by a monopoly?
That is very rare, to say the least.
Posted by Marco | August 4, 2007 3:38 PM
Quoting your own accusations does not provide any clue to your reasoning. It is an endlessly circular argument.
How were you - personally - hurt by the creation and pricing of Microsoft Office? Unless you are a stockholder in a competitor...
Do you see the harm in promoting an organisation that like Open Office that is probably stealing jobs and revenue from your fellow country men, simply because knobs like Larry Ellison prefer to wage war in the press than through product competition.
Posted by Mike | August 5, 2007 3:50 PM
Mike.
Quote;
"Do you see the harm in promoting an organization that like Open Office that is probably stealing jobs and revenue from your fellow country men"
----------------------------------------------------
What I see is that you just don't get it, do you? Also, there is no harm in people making their own free Office program and giving it away to those who want to use it. Or will you have a problem if M$ gives away an ad based (free except for the ads) M$ works? Or is that OK?
Whatever happened to neighbors and friends, or for that matter human beings just helping one another without regard to profit each and every time?
Posted by chips | August 5, 2007 7:52 PM
How many times do with have to reinvent the Micro$oft wheel (M$ Office) and keep overpaying for each new version, which is basically the same warmed over code from the last version?
Posted by chips | August 5, 2007 7:55 PM
As soon as I see someone childish enough to write Micro$oft, I know I'm dealing with the unreasonable. You may as well write U$A.
Posted by Mike | August 6, 2007 4:00 AM
Ah, Mike,Mike, you are as transparent as crystal, you desperately want to take up MS's defense but have not a CLUE as to how do it.
I’m sorry, perhaps at some other moment, when you are lucid we will be able to engage in dialogue.
Truly yours,
Marco
PD: A piece of advice: when you ask somebody something, just to show some manners, you could also respond some question done to you (but please do not answer my question now, since it is no longer necessary)
Posted by Marco | August 6, 2007 6:23 AM
Chips: I don’t find any reason to answer to Mike, he is blind and deaf. I can be mistaken, but I think Mike is a true MS fan- and he thinks that defending MS is a synonym of defending the USA.
But truth is that the US is all about democracy and capitalism. China now is all about capitalism and totalitarianism. And Ms is closer to China’s policies than those of the USA.
Posted by Marco | August 6, 2007 6:24 AM
Marco;
You are right again, no need to answer Mike, as he did not ask a question, or challenge anything of what I answered him. Rather he attacked the messenger, as he could not, it seems respond to the reply or the answer I gave him. He seems to be very much a M$ fanboy, or Neilolite, for a better word, perhaps.
Posted by chips | August 6, 2007 12:38 PM
I mean Mike is sincere (wrong but sincere) different from MS's shills (our old acquaintances)
Posted by Marco | August 6, 2007 1:18 PM
Oh,please. I shill for nobody. Microsoft has its share of faults, but you guys are really just mutually back-slapping twits. Start from some rational base and argue from it rather than arguing from your own conclusions. Half your comments aren't even grammatically parsable.
Posted by Mike | August 7, 2007 1:29 PM