Live Dead: Microsoft Demos its Version of the 21st Century Internet

You can’t make this stuff up: Microsoft demonstrated its Windows Live service to the top 200 journalists and analysts in the computer industry at a conference today [Nov. 1, 2005] in San Francisco, and the demo failed.

Sometimes I wonder whether Gates and company allow demos to fail on purpose, to give their announcements a “roll up your shirt sleeves” feeling — like there’s real software development going on. When Stewart Alsop started the annual Demo conference, speakers joked about “giving sacrifices to the Demo gods” before launching their premature products. What sacrifice did Microsoft make before showing this demo? Innovation, perhaps?

Eventually the demo worked, and Microsoft showed how people could use a sidebar to subscribe to RSS feeds, load podcasts and enter search queries onto a personalized Windows Live home page. Microsoft also presented the Windows Live Safety Center, a free tool that lets customers check on the health of their PC and scan for and remove viruses, and an AJAX-based Windows Live mail client that resembles Microsoft Outlook. Click here to visit the Windows Live demo.

Windows Live is a set of Internet-based personal services, such as e-mail, blogging and instant messaging. It will be primarily supported by advertising and be separate from the operating system itself. Office Live will come in both ad-based and subscription versions that augment Microsoft Office on the desktop.

According to a news report by CNET News.com’s Ina Fried, Gates: We’re entering ‘live era’ of software, “The idea of an online adjunct to Office and Windows is not entirely new. The company already has its Office Online Web site that gets about 55 million unique users a month and offers items such like downloadable templates.”

What is new is Microsoft’s sea change to advertising-supported services for the consumer. In what is perhaps the understatement of the year, Gates said at the conference, “This advertising model has emerged as a very important thing.”

Microsoft’s vision is essentially this: to combine its client sofware with peer-to-peer and Internet services. This “software plus service” model guarantees a revenue stream for Microsoft at the high (corporate) end of the market, while using advertising to subsidize free services at the low (consumer) end. The strategy will lock consumers into using free services at the price of client software and operating system upgrades.

In other words, free products won’t replace paid software. Many of the Live releases will have payment tiers, with the lowest levels free and ad-supported, and higher-end versions pricey as usual.

Here’s an excerpt of a report from the conference, Gates sketches out Windows and Office Live by ZDNet‘s Dan Farber:

At this point it appears Gates is pivoting Microsoft into the 21st century Internet by explaining how Microsft will leverage its current platforms and add more of what MSN has and open APIs to expand the ecosystem of what developers can do on the Web or on top of Office and Windows…and sell more Web-based advertising with its new adCenter platform. Basically, Gate and company have recognized the economic power of what Google, Yahoo, and even AOL have done. Within the next ten years, I’ll predict that MSN will be at the center of Microsoft and generate most of the revenue.

I think Dan’s on the right track with this prediction… but only if Microsoft continues as a single monolith for the next ten years. Odds are good that Microsoft will one day divide itself into smaller, more aggressive entities pursuing these strategies, leaving the operating system entity holding the monopoly bag.

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