Microsoft announced last week that it will offer a free, advertising-supported version of Microsoft Works, its basic productivity software suite. Microsoft is working with undisclosed computer manufacturers to bundle the software and pilot the solution in certain geographies. Combined with other recent announcements about expanding their subscription and Flex-go programs, the ad-supported software suite adds to Microsoft's competitive efforts against Google, piracy, and open source software. (Google offers a Beta version of free online applications - Google Docs and Spreadsheets, and the free software suite from OpenOffice.org has been downloaded 100 million times since 2001.)
Microsoft has not specified where the ad-supported Works will be tested, but the model has clear potential in emerging markets. Developing-country users are more price-sensitive and may be more willing than their developed-country counterparts to trade ads for free, legal software. Emerging-market users might also prefer Microsoft's pre-loaded software over online productivity applications if their Internet connection is slow, expensive or unreliable.
Microsoft's foray into the free software market would benefit low-income computer users who cannot afford full-priced software licenses and do not want to use pirated software. In addition to gaining new (legal) users, Microsoft would also benefit from partnerships with multinational corporations (e.g., Coca-Cola, P&G, Dell) eager to reach emerging mass markets through targeted advertising. Ad-based software could help these potential advertisers capture a larger share of the small but rapidly growing disposable income of emerging mass market consumers.
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