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Will Microsoft offer an online Office?

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With ad-supported software all the rage these days, why has Microsoft (NASDAQ: MSFT) not gone down the path of free software supported by advertisers pocketbooks instead of customer subscription payments? Microsoft's Office 2007 software package is very nice, but quite costly and there's not a lot of incentive for most people to upgrade from earlier versions to see only incremental features for their own specific use. Yet, Office 2007 is selling well (quite well), as the division responsible for selling it saw more than $1 billion more in revenue in its latest quarter from the year-ago period.

Do customers really want to take their spreadsheets, documents and other office items onto the web? Google (NASDAQ: GOOG)'s Docs & Spreadsheets think so, and it's been written about extensively here in the past. Still, customers are paying hand over fist for Microsoft's Office package, which tells the market that there are two things happening.
1) Customers (mostly business) want their office applications local on a PC or server, not on a website hosted by Google.

2) Google's marketing has not aggressively gone after existing Microsoft Office customers. Personally, I use Microsoft Office every day since there are times when I work when not connected to the internet. Therein lies a big problem for some of Google's services: an internet connection is required for everything.

Still, is Microsoft planning on offering a version of Office that is hosted on its servers and possibly subsidized by advertising? Do users really prefer to see ads next to personal financial records, school research papers and business presentations? I'm not convinced, and there are certain computer records most Microsoft Office customers want and need to keep private without being distracted by advertising. So sure, Microsoft could have its Office suite available over the web in what is known as "software as a service" fashion, but giving it away free only to make money on bundled advertising inside Excel, Word, Outlook and PowerPoint? I'm not so sure customers will go for that.

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Last updated: November 25, 2009: 02:25 PM

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