Gates said Microsoft is working on two products, "Windows Live" and "Office Live," that create opportunities for the company to sell online subscriptions and advertising. Both are targeted at smaller businesses and consumers.
The products won't replace the company's ubiquitous operating system or productivity suite, and people don't need to have that software loaded to tap into the Web versions. "They are not required to use Windows or Office," Gates said at a press event here.
Bill Gates, Chairman, Microsoft
Gates said that Windows Live is a set of Internet-based personal services, such as e-mail, blogging and instant messaging. It will be primarily supported by advertising and be separate from the operating system itself. Office Live will come in both ad-based and subscription versions that augment the popular desktop productivity suite.
"This advertising model has emerged as a very important thing," Gates said.
But free products won't replace paid software. Many of the Live releases will have payment tiers, Gates said, with the lowest levels free and ad-supported, and higher-end versions paid for by the user.
"We'll have licenses and subscriptions as well," Gates said. In many cases, companies will have a choice between running software on their own servers or as a Live service.
Acknowledging potential antitrust concerns, Gates said that Windows Live is built off published APIs (application programming interfaces) that its rivals will also have access to.
"It's a dramatic sea change," Gates said of the overall shift to online services. "The live phenomenon is not just about Microsoft. It's partners, it's competitors...the whole space is being transformed."
Ray Ozzie,, joined Gates in detailing the plan.
Toe in the water
The Internet-based services announcement . But Microsoft has kept details of the plan tightly under wraps.
Gates likened the services push to other major strategy shifts at Microsoft, including its December 1995 move toward the Web and a June 2000 commitment to Web services.
The idea of an online adjunct to Office and Windows is not entirely new. The company already has its Office Online Web site that gets about 55 million unique users a month and offers items such like downloadable templates.
And in years past, Microsoft has attempted to build online alternatives to Office. One widely rumored project,, was never made available.
One reason: Infighting between Office executives and Web advocates, according to sources at the time. David Smith, an analyst at Gartner, says that same tension still exists within Microsoft.
"There are different factions within the company, like before, and it is unclear what the corporate strategy is going to be," Smith said.
Windows comes online
Microsoft Live will consist of new services as well as some products previously offered under the MSN brand. MSN.com will continue to exist as a site for "programmed" content. Windows Live will be more personalized, the company said.
"It's easy. It's live, and it has 'me' at the center of the universe," said Blake Irving, a Microsoft vice president who was on stage to demonstrate Windows Live. However, the demo failed. "All of you guys that have done demos have been there," Irving joked.
Blake resumed his demo a few minutes later. He showed how people could use a sidebar to subscribe to RSS feeds, load podcasts and