Microsoft Tosses Ads Into the Works

Microsoft (Nasdaq: MSFT) is launching a pilot program to test a free, advertising-funded version of Microsoft Works, the company confirmed Friday.

Dubbed "Microsoft Works SE 9," the ad-supported version of the entry-level software will be distributed preinstalled on computers manufactured by a select group of participating OEMs (original equipment manufacturers) starting in the next few months, Microsoft said. It will be a desktop client -- not a Web-hosted product -- and reportedly will not be available as a download.

"Each of the Works family of products has a familiar and easy to use experience, so consumers can have a similar experience at work, home or school," Microsoft said. "The Works SE 9 pilot will have the same experience but with ads added to the productivity experience."

It's Free

With retail pricing of just US$39.95, Works is an inexpensive package of word processing, spreadsheet and other programs oriented toward home users rather than professionals. Frequently bundled on new PCs, it is effectively free for many users. Microsoft Office, on the other hand, is the company's higher-end productivity package, with suite pricing from $149 to $679.

Works won't be the only free productivity suite out there. OpenOffice, for one, is being increasingly embraced by individual and government users, while Google earlier this year rolled out its Google Docs and Spreadsheets, a hosted, online suite of productivity tools.

Microsoft did not say whether it planned to test out any online versions of its software.

An Ad World

Microsoft's move is one of several indications in recent weeks that it has its eyes on advertising as a new source of revenue.

Last week it announced that it will buy online advertising exchange AdECN, for example. Before that came the announcements of its acquisition of Seattle-based ad firm aQuantive; Avenue A | Razorfish, which produces creative content for interactive ads; Atlas, which develops digital marketing technology; and digital advertising network Drivepm.

Rival Google, meanwhile, which is already deep into the ad space, is undergoing intense scrutiny for its proposed $3.1 billion acquisition of DoubleClick (Nasdaq: DCLK).

Response to Google

"This is Microsoft's response to Google Apps, as well as its first big test of an ad-supported version," Rob Enderle, president and principal analyst with Enderle Group, told the E-Commerce Times.

While Google's software is an online tool, Microsoft's works "will have a better offline profile," Enderle said.

"Free is good for everyone," Enderle noted. "The big questions are how annoying the ads become, and whether the software becomes viewed as 'crapware.' Overall, it does basic things well, though, so this is a good test to see if the ad model will work."

Microsoft is certainly moving more aggressively into the advertising market, but "I don't think this is necessarily an indication of any broad strategic shift," Matt Rosoff, an analyst with Directions on Microsoft, told the E-Commerce Times.

Online Business

The company is experimenting with multiple new places for advertising, including its acquisition of Massive, for example, which specializes in placing advertising in video games. "Now a lot of Xbox 360 games are coming out with ads in them," Rosoff noted.

"This is just one of many things Microsoft is doing to try to create a new business centered around online ads," he explained.

It's not yet clear whether Microsoft will lower the price it charges computer manufacturers who install Works on their machines, Rosoff added, "but I had the impression they weren't getting much money anyway, so this is just a way to get a little extra."

In the long run, "this is only a trial, and it may not last," Rosoff concluded. "If users and OEMs like it, it could continue -- but I wouldn't expect to see an ad-supported version of Office or anything like that anytime soon. Microsoft's core business software will stay with the same business model for the time being."