Opinion: Microsoft is moving to an ad-supported Web Services model, but what does that mean for user expectations and privacy?Are Web services going to be the Next Big Thing? Is the future going to be ad-supported?
Apparently Bill Gates thinks so. In an Oct. 30 memo recently leaked to the 'Net, Gates states that "This coming 'services wave' will be very disruptive," going on to state that Microsoft has "competitors who will seize on these approaches and challenge us." He goes on to point out that "This next generation of the Internet is being shaped by its 'grassroots' adoption and popularization model, and the cost-effective 'seamless experiences' delivered through the intentional fusion of services, software and sometimes hardware."
Clearly, the folks at Microsoft are worried about a plethora of new competitors such as Google, Skype, Adobe and others who've risen to prominence over the past few years, some seemingly out of the blue. More and more software that used to reside on the desktop is beginning to be deployed on the Web via technologies such as AJAX. Google and Sun have teamed up ostensibly to promote the Google Toolbar through downloads of Sun's Java Runtime Environment, but rumors of some sort of "Google Office" coming out of the combo still continue to float around. Adobe's PDF format is fast becoming the online document standard. Bill's getting nervous.
And with good reason. The seemingly air-tight strategic decision to integrate the browser with the desktop that Microsoft's been working towards for years may end up being its Achilles heel, providing an open window (pun intended!) into which competitors can reach Microsoft customers. Adobe's dominance of the document market eats away at the necessity for everyone in the world to own Office (though Microsoft is apparently readying their own document format named "Metro." Linux and other open-source solutions gain more and more traction all that time. And Firefox continues to pull more and more folks away from Explorer.
Microsoft intends to respond to the challenges in a couple of interesting ways. According to the Gates memo, Microsoft must "provide a broad set of service APIs and use them in all of [their] key applications," integrating Internet Services into all their software and providing the development tools that the legions of Microsoft developers out there will need in order to deploy new (presumably Microsoft-centric) applications on the Web.
More interesting, however, is the hint that Microsoft is going to turn towards an advertising-supported model for its revenue stream. "Advertising has emerged as a powerful new means by which to directly and indirectly fund the creation and delivery of software and services," states Gates in the e-mail—a sentiment echoed by an attached memo from CTO Ray Ozzie entitled "The Internet Services Disruption". In the memo, Ozzie points to "the power of the advertising-supported economic model" as the first of the "three key tenets that are driving fundamental shifts in the landscape."
It all sounds like pretty heady stuff. For Microsoft to move to an Internet Services model supported by advertising means a fundamental shift in strategy; a shift away from imagining that locking users into a proprietary model where they're held captive by initial software choices means stepping into some pretty chaotic territory. Ozzie seems to recognize this, but also seems to recognize that they have no choice: "Products," he points out, "must now embrace a 'discover, learn, try, buy, recommend' cycle" which might involve both free and advertising-supported business models.
For most of us, of course, none of this comes as news. Shareware, freeware, and demos have been facts of all our lives for a long time now. Most of us have become addicted (or, perhaps more charitably, dependent) on ad-supported Web sites for our news and communication. Gmail and Yahoo and Hotmail have been delivering e-mail services via the Web for years now (and doing quite well).
But what about other software? Will consumers flock to online versions of Office and other types of services hinted out by the new Microsoft Live site and the soon-to-come Office Live site? Will applications with seamlessly-integrated ads be welcomed? Will users want their productivity apps delivered over the Web?
Time will tell, I suppose, but there's a long-history of advertising-supported software out there. Unfortunately that history is sullied by a lot of spyware, malware and other nasty bits of code that watch what we do and use that information to market to us more aggressively. The "Application Services Provider" boom (and subsequent bust) of the early 2000s showed that while the idea of delivering software over the Web is a good one, making money at it can be trickier than we sometimes think.
Ozzie may be right when he calls what's going on today "The Internet Services Disruption," but we've clearly got a ways to go until anyone really understands just how disruptive it's going to be. It's one thing to logically conclude that Web Services make sense in some applications that we need universal access to (such as e-mail), it's quite another to assume that people are going to want to depend on their Internet connection if they want to write a letter (and even if they want to see contextual ads in their Office environment). The privacy issues around these kinds of services can be pretty hairy, too…do you really want Microsoft recording what you do in your documents? As Sony recently found out, privacy is a big deal to most consumers, and not respecting the privacy of customers can result in some pretty big PR problems.
Get ready to be disrupted.
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