Aiming to turn more new PC buyers into Office users, Microsoft has announced plans for several new ways to obtain the software, including an ad-supported "Starter" edition that can come loaded on new PCs.
In a blog posting Thursday, Microsoft said the starter version of Office will have limited features and include only Excel and Word. The starter version will be part of the Office 2010 family, due out next year, and will only be available on new PCs.
"Office Starter 2010 will provide new PC owners with immediate exposure to the Office 2010 experience on new PCs right out of the box," Microsoft said, adding that it can be upgraded to one of several full versions of Office with a new upgrade card to be sold at retail stores.
The product is a replacement for Microsoft Works, which was Microsoft's low-cost option for PC makers that wanted to include basic productivity software. Microsoft had also quietly tinkered with a free, ad-supported version of Works in recent years.
Office Starter, as opposed to Works, will have full file compatibility with Office as well as features like the 'Ribbon' user interface.
"It really is a replacement for Works," Microsoft corporate vice president Takeshi Numoto said in an interview on Thursday. "It is not a mere renaming of Works. It is an Office product."
Microsoft is trying several ideas to better compete with free rivals such as Google Docs. With Office 2010, Microsoft will also offer a free, ad-supported version of Office that runs in a Web browser. That product, which went into a technology preview last month, requires connection to the Internet at all times.
"It's a way for us to reach customers who may have not experienced Office before, (for them) to get a taste of it," Numoto said.
For years now, Microsoft has grappled with new ways of selling Office, which, along with Windows, is one of the company's two main profit engines. Although Office boasts half a billion users, there are lots of folks that use pirated copies of the software or don't have Office at all.
Several years back, as part of a ThinkWeek paper seen by CNET News, Microsoft workers recommend that the company scrap Works in favor of an ad-supported product, saying Microsoft only got a couple dollars of revenue per PC when Works was included.
Numoto would not go into financial details for Office Starter, but did say that it is a "royalty-bearing" product for Microsoft, as Works was. In the past, though, PC makers have had an opportunity to earn back money if customers upgrade from a trial version of Office to the full version. Numoto wouldn't detail how that might work with Office Starter.
Microsoft is also trying out a new method for those that already have a PC to try out Office 2010, once it is available. Called "Click to Run," it brings the notion of streaming to software. Instead of waiting for the whole product to download, users can click a button and start using the software as soon as some of the basics are downloaded. The rest of the product then gets downloaded over time.
Microsoft has already seen the Web increase as a means for getting its software. Numoto said that in the last fiscal year some 23 million downloads of the Office trial, nearly double the number from a year earlier.
Still, he said, downloading a big file means a long wait. "We know we could do a lot better to streamline that experience," he said.
An additional benefit of the Click to Run installation is that it is done through application virtualization. That allows the code, even though it is still being run locally, to run side-by-side with an existing version of Office. That would allow, for example, a user to run a trial version of Office 2010, without getting rid of their existing Office installation.
Intrigued to learn that Microsoft has been testing its ad-supported version of Microsoft Works here in the U.S., I wanted to see it for myself.
A Microsoft Office ad inside the main screen of Microsoft Works 9 SE.
(Credit: Ina Fried/CNET News.com)After work on Friday, I headed to Costco and to Best Buy, both of which carried Sony laptops that included the product, known as Works SE (Sponsored Edition). As Microsoft said, the product carries largely "house ads" that pitch Microsoft products such as Office. The ads themselves are small, taking up just about a 2-inch square in the bottom right-hand corner of the screen.
Clicking on the ad didn't appear to do anything either. Of course, this is largely a test of the technology. Microsoft has built into Works SE the ability to serve ads via the Internet, should it choose to do so.
I took a few pictures with my cell phone camera, which are included not for their photographic quality, but rather to give a better sense for the feel of the advertising.
As can be seen in the image below, the ad isn't what takes up the most space. It's the right-hand pane in general, something that I believe exists in non-SE flavors of Works as well. This was less of an issue on the 15-inch Sony laptop I was looking at than it might be on a smaller screen.
Inside a word-processing document, the advertisement is just a small one in the bottom right-hand corner of the screen.
(Credit: Ina Fried/CNET News.com)Although the advertising makes Works free, for most of its users, Works is already seen as free software. Historically, most Works users got the standard version of the program when they bought a new PC, so they weren't "paying" for it separately.
What has changed is the dynamics between Microsoft and the computer maker. Instead of paying Microsoft a couple of bucks to load Works, PC makers in the trial are getting Works SE for free. The price difference may not seem like much, but margins on PCs these days are razor-thin. Computer makers already clutter up their desktops with icons for all kinds of crapware to squeeze out a few extra dollars.
In that context, I think it is probably wise that Microsoft is going with smallish ads. However, the company could certainly gain more value from the advertising by making the ads more dynamic and by targeting them based on a user's Live ID. It could go a step further and try to serve up context-specific ads by scanning the contents of the document, but this would doubtless raise privacy concerns and arguably produce ads no more relevant than by using user profiles.
Also of note, while most of Microsoft's testing is around letting computer makers bundle Works SE for free, the company has done some other trials in Poland in which the software was distributed on its own.
Updated 4:15 p.m. with details on the countries in which Works SE is being offered.
After years of exploring the matter, Microsoft has finally started offering an ad-funded version of Microsoft Works in some countries.
Users who run the software see a small ad as they are writing their document or editing their spreadsheet. Although the program has the ability to update its set of ads online, today it runs mostly ads for Microsoft and a few partners, all of which ship with the product itself.
Works SE (which stands for Sponsored Edition) is free to PC makers, though they don't get a cut of the ad revenue. Large computer makers typically only pay a buck or two for the low-end version of Works, though.
The ad-funded Works falls into a category of several products the company is exploring, rather than a significant new source of revenue, said Microsoft Vice President Chris Capossela.
"This is a trial," he said. "This is a pilot. This is a 'Can we build software that will do this?' "
Microsoft has been considering such a product for some time, with many inside the company arguing that Microsoft could make significantly more money for Works by selling advertising than it gets in revenue from computer makers for the product.
Capossela said the early response to the free product has been positive. "People have liked the price," he said with a laugh, adding that it has also not been perceived as that intrusive, something Microsoft had worried about.
Last August, Microsoft said that it
Microsoft remains cagey on the details of where you can find Works SE. The company has been testing Works SE in 5 countries: The United States, France, Canada, Poland and the United Kingdom. It is available only through select computer makers and Microsoft won't say which computer makers those are.
According to its Web site, Packard Bell offers the software on some of its models in the United Kingdom. Using the same sleuthing technique (a search engine), it appears Sony is one of those offering it in the U.S.
Capossela put Works SE in the same category as several other new approaches, including the Albany subscription service that Microsoft detailed this week. Also in that camp would be the prepaid Office cards that Microsoft has been selling in some countries for more than a year now.
Response to that last product, which sells Office in six-month increments for around $20, has been mixed. The cards were a hit in South Africa, but bombed in Mexico.
None of these areas are significant new channels as yet.
"There's no business here yet," he said. "These are all experiments."
The one area where Capossela said Microsoft has seen significant sales is the download and purchase of Office over the Web. Customers either download a trial version of Office directly from Microsoft or get it with a new PC. After 60 days of use, they are prompted to buy a full version from Microsoft or a partner (partners typically sell the product cheaper than Microsoft).
Microsoft was not quick to seize on selling directly over the Web, Capossela said.
"We're late," he said. "If you look at Symantec and Intuit, they have huge businesses here."
Capossela also stressed that Microsoft is focusing its efforts on new ways of selling Office and creating online products that complement Office, not replicating the suite on the Web. He said that Microsoft still doesn't see much competition from Google Apps.
"We haven't seen them yet," he said. "We've seen a love affair in the press. We haven't seen customers embracing Google Apps."
As for Albany, Capossela said the main idea is to try and have a product that can be pitched by the Geek Squads of the world when people buy a new PC at retail. Tech benches, as these services are known generically, have become an important avenue for consumer software sales.
"This is designed for a certain sales motion and if that sales motion didn't exist, this product probably wouldn't exist," he said.
That said, Microsoft has yet to sell the product to those retailers or determine how much it will charge for the subscription product, which combines Office 2007 Home and Student Edition, Windows Live OneCare security, and other free Windows Live services.
Have you seen the ad-based Works on a PC? If so, drop me a note at ina dot fried at CNET dot com and let me know which model.
Microsoft confirmed Friday that it has started testing for a product code-named "Albany" but would not offer further details on the product, which may or may not be its ad-funded version of Works.
ZDNet's Mary Jo Foley posted a report earlier Friday saying that Albany is a consumer product in the Office family. She didn't get anything concrete out of Redmond either, but has some informed speculation of what it might be.
Microsoft said last year that it plans to test an ad-funded version of Works, following several years of exploring the idea. However, it is unclear whether Albany is in fact that product.
The software maker already has its Office Live Workspaces product which lets people store and share office documents online, but unlike Google Docs and Spreadsheets, does not allow documents to be edited online.
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