November 16, 2005 4:00 AM PST
Microsoft eyes ads as consumers close wallets
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According to internal documents seen by CNET News.com, Microsoft gets only about $2 for each copy of Works that is bundled on new computers. The standard version of Money isn't even a break-even proposition, and the company has had to heavily discount its OneNote application in order to get computer makers to include it.
Microsoft predicts that things won't improve from here, either.
"The outlook for the packaged consumer retail software market is poor," MSN workers said in an internal strategy paper seen by CNET News.com. "The size of the market is shrinking, and consumers appear less willing than ever to buy software applications off the shelf."
In the paper, Microsoft said that worldwide sales of full packaged software--which includes Works, the Encarta encyclopedia, digital imaging software and Money--dropped by 7 percent in fiscal year 2004. In addition, the company said it was seeing similar trends for fiscal 2005.
The tepid forecast, combined with concerns that others might offer free versions anyway, is prompting Microsoft to take a hard look at selling free, ad-supported versions of many of its consumer titles, like Works. And, in some cases, the numbers may well add up.
Calculating that the average person keeps their copy of its entry-level productivity suite Works--a kind of "Office lite" for consumers--for about three years, Microsoft reasoned that it wouldn't take a lot of ad revenue to justify moving the product to an ad-driven model.
"That means that if ad revenues exceed 67 cents per year, we could actually give Works away and still make more money," two Microsoft researchers and one person from MSN stated in a paper presented to Chairman Bill Gates at a Thinkweek brainstorming session earlier this year.
Microsoft is not alone in seeing its consumer business trail overall software spending. IDC estimates that consumers worldwide spent $4 billion on software last year, and that total is pegged to reach $4.7 billion by 2009--a compound growth rate of just more than 3 percent.
By contrast, global packaged software revenue is much larger--$91 billion in 2004--and projected to grow to a healthy $120 billion by 2009.
Consumers just aren't seeing enough value in what's inside most software boxes, IDC analyst Albert Pang said. With programs like Excel and Word, Pang said, most people just use a fraction of the features and aren't willing to shell out big bucks.
"Only professionals are willing to pay the full retail price for the software," Pang said. "Somehow, somewhere, a better strategy needs to be developed to expand the market," Pang said.
Members not wanted
The MSN strategy paper argues that subscriptions are not the way to go, pointing to the success of Google's ad-supported Gmail. If Google's Web mail service is successful, Microsoft estimates the annual revenue per subscriber could top $20 per user, leaving "no room left at all for mass market consumer subscription services."
Instead, the paper points to nontargeted advertising as the way to go to pay for basic, low-cost services.
"High-cost services (many of which are currently paid) will be funded by an exchange of user information that will allow better targeted advertisements," the Microsoft paper contends.
The software giant has confirmed that both papers are genuine, but has declined to comment further. A Microsoft source noted that both papers represent internal brainstorming around new business models and that no decisions have been made.
In the MSN-drafted paper, Microsoft points to controversial adware maker Claria, noting that Claria claims ad rates six to 20 times those of traditional Web advertising because of its ability to target to a user's activity. Microsoft was said to be in talks to buy Claria earlier this year, though no deal was announced.
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Second, the item: "The product, originally code-named Moonshot, combines context of what a user is searching for with demographic information about who is doing the searching."
Who gave them the demographic information? If Microsoft is sucking it off of your machine, that's invasion of privacy. Exept of course the MS EULA pretty much requires you subservience to whatever MS decides is in your ("their") best interests.
Of course consumers as usual have no voice in what they are spoon fed. If the majority of vendors are doing it then voting with your wallet won't have much impact either.
So much for freedom of choice.
What do you think?
If Microsoft is OEM-ing Money to be bundled on PC's for $2 per PC, then they are making much more than $2 per USER. When I get a new PC, it is so loaded with crap it takes me a couple of hours to delete it all. The vast majority of it is uninteresting to me [as a side note - I wish PC manufacturers would STOP this annoying bundling practice and just give me plain-vanilla Windows].
So, how many users actually use a particular bundled program? Maybe 5%-10%? Microsoft is really capturing on the order of $20 per actual USER. This expected usage rate is factored into the negotiation on bundled pricing.
So, if MS switches to an ad-supported model, they will have to capture $20 in revenue per year from that user to break even. For an untargeted ad (which would typically be the case for users of a generic program like Works or Money), I doubt MS could get more than $0.05/click. So, a user of Works would have to click on 400 ads per year to pay for it.
I don't see it. Would YOU click through on an ad every day? And even at optimistic click-through rates, you have to be shown 100's of ads per day to find even one per day that was on interest to you.
It doesn't make economic sense (to me), and you're going to alienate your customers since you'll have to make the ads obtrusive enough to get click-throughs in order to make them valuable.
Synchronising Software for PDAS - 10/17/05 @ 09:22
Task: Synchronising Software for PDAS
Description: It is already possible to connect to two of the major strains of PDA: Palm (via the Palm desktop) and Psion (via the add-in to NetDrive). However there are no synchronising applications. I would like an application which takes data created on a PDA (principally Psion EPOC, since I own a 5mx) and convert it to and from application formats available for OS/2 (principally SmartSuite, since that is my main productivity Suite, but also OpenOffice). I'm sure that connectivity for Microsoft handhelds would be useful to somebody as well.
Current Bounty: $0
Sponsors: none
Submitter: Stuart Gray
Posted by: Kim Haverblad
, and coming from:
http://www.os2world.com/cgi-bin/news/viewnews.cgi?category=58&id=1129533770
Sounds like Microsoft is considering an approach that may well lead to Windows having lots of preinstalled spyware, or at least spyware hooks to increase Microsoft's profits.
To me, that makes using an Ubuntu Linux desktop a much more attractive alternative unless I need to use Windows-specific software.
Has Microsoft ever thought that maybe consumer software growth is so slow because most of the stuff out there is about 1 notch above trash?
It would be interesting to compare some really good consumer software with the mediocre stuff and see the difference in revenue and growth.
Microsoft works isn't a good package. it's such a bad package that one version of works can't even read the files from a previous one. Talk about lack of backward compatability!
Consumers do not want ads, (Making out desktop apps additional points of spam) will just cause consumers to delete the apps, and look for non invasive apps elsewhere. If MS is TRYING to loose the desktop, then the strategy is brilliant! Carry on!
Tom
since it is easy to block the ads. I keep a list of what I consider
safe ad supported Windows software for my friends and provide
them with a host file that prevents the ads from being
downloaded.
I'm sure that if MS starts giving away ad-supported software,
there will be a wealth of MS adblockers spring up on the net. So
after a while few users would ever see the advertisements.
Perhaps a better solution would be for MS to start selling their
products at a decent price. IMO, $100 for either Windows or
Office ($200 for both) sounds like a fair price.
Personally, I don't care. Years of supporting Windows has
convinced me to avoid it like the plague. All my computers are
Macs or Linux.
BTW, they want to emulate Claria? You have to be joking. Claria is spyware central isn't it?
INTUIT's Money app's developers were upgrading to "new & improved Win95" & Citizen Gates makes them an offer they couldn't refuse... MS buys INTUIT.
Citizen Gates: "nice little niche you have there in the financial-biz INTUIT".
INTUIT: "Thanks, but no thanks MS."
Presto-chango MS announces "new" MS MONEY app for Win95 & beyond...(huh, I wonder where they got the app-code for that one...?)
FLASH FOWARD 2005 : MS announces that it isn't really making any money with MS-MONEY. Gee, do you really think their mission was to make money with this? NO?
Smells like the FREE MS-IE produced to give the public "new options" instead of Netscape's Navigator.
Lost leader to suck money away from "threat of competition" until they go out of business.
MONOPOLIES HATE COMPETITION.
This time Intuit seems to have "out-pokered the MS-Sharks" at their own game.
You got enough money Citizen Gates.
Time to retire.
I was using a 2002 version of Money last Christmas and it really impressed my girlfriend. She went out and bought the 2005 version. The online setup was so persistent she was flustered before she made it past the initial setup because she doesn't trust anyone(not just MS) with her financial info. Then she wanted to change her password. That was an exercise in hell. NO ONE TRUSTS online banking 100%. NO ONE TRUSTS others with their financial info, unless it is "others'" specific job. Money stores all kinds of sensitive information. Users don't want it online - they want it sandboxed.
Money needs only 3 versions - Regular Folk, Upper Middle Class Developers Who Don't Hire Accountants, and Small Business. The Basic Version is too Basic and the Deluxe version has too many features. There's no fine line. Quicken isn't any better.
Works' problem is that it suffered from both lite and old versions of software. They fixed the "old" part but now have to eliminate Standard/ lite versions. The integration is progressing, but it hasn't gone all the way to being a full-fledged Home Suite. Office has full versions of software. There are no basic, deluxe and premium versions of Word. There's Word. MS always looks at Works as a way to give consumers enough of a product to whet their appetite to buy the full stand-alone versions. When they do, the Money/ Streets-Trips/ and Encarta standalones don't integrate back into Works. The Deluxe software is all top-notch but the Standard versions aren't very useful.
I love the idea of Works. I just don't like the implementation.
Encarta and Streets/ Trips are the same. Much better than anything online, but it's just easier (and cheaper) to look things up online. Why 2 or 3 versions? Just sell 1. For $20. With 1 yr of updates and $5/ yr updates after that. There's your subscription revenue. They beat anything online hands down and you can take them anywhere you can take your laptop, whereas online access isn't available widely or cheaply.
The reason why the products aren't selling as well are many-fold, but the largest reason is that MS isn't focused on regular consumer software. Works as a Home Suite isn't even 10th class compared to the effort on Office. The perception is that Works is crippleware.
This way, also, MS Could push the Media Center PCs, have this ad system, and not encroach on user's personal data.
Brandon Rusnak
http://www.rusnakweb.com
- It can be amazing
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by jmmejzz
November 16, 2005 4:27 PM PST
- what will happen when a company produces a product people want to buy. I always get the impression from stories and interviews that MS tends to focus too much on what consumers should buy and not what they want to buy. Just listen to the tone of this "memo", it's about maximizing revenue to MS not providing a product consumers would actually want.
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