The ads are coming, the ads are coming

A lot of people reacted to the suggestion that Microsoft may offer free or low cost versions of its software supported by ad revenue as if Microsoft had offered to sell software that shoots daggers into your eyes (Aaaaargh...goddamn you, Clippy!!!). Yes, ads can suck. However, as anyone who has clicked a context-sensitive link in Google knows, sometimes they don't suck quite so much. Perhaps I'm just expressing my typical contrarian nature, but I think the idea is a good one, and has a lot to recommend it.

I do note the objections posed in yesterday's blog post by Phil Wainewright. Making ads useful, and thus likely to get noticed, will take work. However, if they do get it right, it could turn into a great way for Microsoft to offer its software to new segments of the marketplace - namely, people who don't want (or can't afford) to pay for Microsoft software.

Do note that the proposal came, as the original article suggested, from a Microsoft ThinkWeek proposal. Thinkweek proposals are a bi-annual event at Microsoft where employees submit ideas for upper management to read. As such, they don't represent plans so much as intellectual twigs for upper management to chew. As you might divine, this hyper-opinionated Microsoft employee made a Thinkweek proposal, too. This one, however, is not mine.

Anyway, the following are reasons why ad-based versions of Windows and Office make sense:

1. Retaking the "low cost high ground:" Windows historically has cost less than its competition. Windows NT was cheaper than the Unices with which it competed. Windows machines were cheaper than Apple machines.

Clearly, however, that dynamic has changed with the arrival of free, as in cost, open source software.  It's fair to point out that most don't download Linux source code and roll their own operating system, thus undermining the notion that Linux is "free" from a practical standpoint (which makes RedHat executives sleep well at night).  Likewise, there are arguments to be made in terms of the maintenance costs of open source products (my opinion, of course). This does not change the fact that open source software can be - and very often is - free as in cost.

Microsoft could help to erase that advantage by offering free versions of its software from which revenue is derived through advertisements. This could easily get annoying and become a real bother to people. However, people have gotten used to ads all over web pages, and provided Microsoft thinks carefully about placement as well as the nature of the ads, they might even be considered beneficial. Google's context-sensitive ads ARE useful.  If Microsoft could manage something comparable, consumers would benefit.

Do note, however, that anyone could still get an ad-free version of the product by paying for it. That's an option to those who find the ads too distracting, such as businesses or regular consumers who just prefer less noise on their desktop.

Might this still leave an advantage to open source, a product that is (theoretically) free as in cost as well as free of ads? Perhaps...but its worth remembering that open source competition has been around for awhile, and people STILL opt to pay for Microsoft products. How much of a dent has OpenOffice made in Microsoft Office's market share? Microsoft will still have to work hard to push the state of the art forward in order to keep ahead of open source competition (and yes, they do move it forward, however much the "everything Microsoft does stinks" contingent protests otherwise). Still, it lowers the barrier to entry considerably for Microsoft products.

2. Neutralizes piracy: Piracy exists for a simple reason: people want a product, and they don't want to pay for it (or at least, don't want to pay full price). By offering an ad-supported version of their leading products, Microsoft would give these people what they want AND make money from them....without those individuals ever having to pay a cent.

Pirated software constitutes a massive industry, particularly in places like China, where the majority of software, according to current statistics, is pirated. Giving away free ad-supported versions of Microsoft software turns pirates into paying customers by making "eyeballs" (read: an ad-viewing public) the thing that pays indirectly for use. 

3. The developing world: Microsoft faces a conundrum when trying to sell software to both rich markets and the developing world. It makes sense to charge less in the developing world, just as it makes sense to charge less for generic "Food Club" brand cheese than for Sargento cheese, even though the cheese likely comes from the same block. To prevent bleed-over from product sold at a lower price, however, Microsoft has to find a way to make the product less appealing in richer markets. The solution thus far has been to make limited capability versions of their software which are sold at lower price.

It would be much easier, however, if Microsoft could offer a free version from which they still earn revenue, however indirectly. This way, Microsoft could offer the same products globally, and no one would feel slighted by having to pay more for the same piece of software.

4. More revenue through targeted marketing: The holy grail of marketing is to target an audience with the sort of ads that most appeal to them. Sending a bunch of male programmers advertisements for breast enlargement isn't terribly useful. Sending a bunch of male programmers advertisements for a four hour extended version of "Star Trek: The Wrath of Khan" is useful.

In other words, Microsoft could require customers of their free version to provide certain details about themselves. Yes, I know, some in the Talkbacks will declare they'd sooner eat pot roast prepared by Idi Amin than give Microsoft their personal information, but I don't think that's the case with most readers, or most of Microsoft's customers....particularly if they get access to Microsoft Office for free.

This could be important in high-revenue products such as Office. Office isn't cheap, and Microsoft will want a way to recoup some of that lost revenue. Creating targeted marketing opportunities might be one way to enable that, particularly when it's recognized that the up-front cost gets averaged over 3-4 years (lot easier to recoup $100 per year per user than $400).

All in all, I think it's an idea worth considering. There are many issues, among them the fact that many don't access the internet on a regular basis.  This makes it harder to update ads with any frequency, which is less of a problem in the West, but a clear and present issue in the developing world. On the other hand, ad-aware free versions of software are better than a pirated version, even if the ad capability is not fully functional due to infrequent (or non-existent) internet usage.

To the naysayers, however, maintain some perspective.  People need to remember that this would mean many of Microsoft's products would be available for free (or at least, a lot cheaper than they are now).  I have trouble seeing why that would be considered a bad thing in anyone's book.

Since this is a post that talks heavily about Microsoft's future plans, and since people get confused by the fact I'm a Microsoft employee, I'll reiterate that these are MY OPINIONS, NOT MICROSOFT'S.  I am not Microsoft.