Microsoft 'Live Era' Meets Dead Air

SAN FRANCISCO – About every five years, Microsoft holds an event to introduce a "big bet" that Bill Gates (search) is making in hopes of changing computing as we know it.

On Dec. 7, 1995, he announced Microsoft would support the Internet in its applications and operating systems.

July 2000 brought .Net (search), a programming architecture for Web applications, among other things.

On Tuesday here at the Palace Hotel, Bill introduced what he's calling the "Live era," in which software and online services and applications work together, portions paid for by advertising and subscription revenue.

It will be a few days before I've really digested what was I witnessed here Tuesday, but here are some top-line thoughts:

Microsoft showed two online platforms, Windows Live and Microsoft Office Live.

Windows Live is a renamed version of Microsoft's Start.com service. You can play with Windows Live at www.live.com.

What you will find there looks like a cross between MSN and SharePoint. It's a customizable home page, with new features to be added as the beta continues.

Microsoft Office Live is a set of small business services, including Web hosting and e-mail that is built largely atop SharePoint and incorporates the old bCentral hosted services.

If you get the idea that Microsoft didn't show anything incredibly new, you're right. What was shown were feature enhancements and repackaging.

Still, Office Live will interest really small businesses (10 or fewer employees) as soon as it goes live early next year.

I will describe the specific features of the two Live platforms to the news stories. I've played with Live.com a bit already and as it currently exists, it's a yawn.

Microsoft is making its biggest push ever into advertising-supported software. This isn't at all surprising, and the company will soon roll out a new, global ad server to place relevant ads into content and services delivered to users.

The new ad-based services are a major swipe at both Google and Yahoo, and seem to eclipse both of them.

It would not surprise if a year from now, Microsoft was widely considered to be superior to its competitors' offerings.

Expect to see some MSN products, perhaps including Messenger, rebranded as Windows Live.

However, MSN will continue to be a Microsoft's "programmed content" service, although I wonder how separate these services will remain over time.

Tuesday's announcements do not have Microsoft replacing the Office Suite with online applications.

However, in an offline discussion after the presentations, Microsoft CTO Ray Ozzie (search) said the concept was possible and could happen as Microsoft learns more about what its customers want from its experiences with the new Live services.

Although Microsoft will now be competing more directly with Google, Yahoo and others for advertising revenue, the company will be better positioned than its competitors to weather a drop in such revenue.

Indeed, an advertising price war could do far more to hurt Google and Yahoo than it would Microsoft, for whom advertising will be a minor revenue source for the foreseeable future. This is a fight Microsoft is wise to be picking right now.

While many of the services are being pitched to small business or individuals, the lines aren't sharp.

Small groups in large organizations will benefit as well. And individual users will carry the services with them between their work, home and mobile lives.

Yes, there are paid services that will be offered atop the free ones. Did I hear Microsoft talking about a hosted full-bore CRM service (that would compete with Salesforce.com?), I'm pretty sure I did.

Earlier, I mentioned that this was Microsoft's third "big bet" presentation in the past 10 years.

I've attended all of them and must report that Tuesday's had the lightest attendance (90 compared to hundreds in 1995), the worse system crashes (almost all the demos lost network connections), and was, frankly, the least exciting.

But, that's largely because what Microsoft showed Tuesday was almost totally evolutionary, though bringing it together and giving in a mostly-free pricing model approaches a revolution.

The big deal Tuesday is that Microsoft is embracing a new services model, though not totally.

Microsoft is still wedded to an old, packaged software business model that the services model threatens.

Today, Microsoft is linking services to software, making the Office Live apps integrate with the Office desktop apps.

Over time, I expect to see more online software and less packaged software, although the line between the two will blur considerably over the next few years.

I don't think anybody walked away from the presentations too wildly excited.

But, I did see services I already use presented in a new way; I saw some new services that look interesting; and I saw Microsoft lining itself up to compete with Google and compete with them hard. The competition will be fun to watch and should offer exciting new products to users.

It's going to be a while before I can completely explain what Microsoft presented Tuesday.

There's Windows Live and Microsoft Office Live, two collections of—at least in the beginning—largely ad-supported services for users and small businesses, respectively.

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