• by Jonathan Blum , November 9, 2010

For all the peculiar twists, dents and dings of the digital revolution, this may be about the oddest: With zero fanfare, old-school, dawn-of-the-desktop office productivity tools - digital moldy oldies like word processing, calendaring and sketching - are getting a Web 2.0 makeover. Office productivity heavies Microsoft and Google, along with dozens of other start-ups, are smashing the building blocks of the virtual office and recasting them as more Web-based, collaborative modules that are ripe for savvy advertisers cutting fresh paths to new markets.

"This area is definitely exciting," says Nicholas Ward, principal product manager for Range Online Media, a Fort Worth-based marketing and media firm with a specialty in emerging digital marketing. "When you really boil it down, you are going to spend most of your time in Word, Outlook or Excel. And that's as organized and as marketable a group as you will find online."

In terms of sheer marketing scale, the potential for the sponsored office is breathtaking: Microsoft claims 450 million active Office users worldwide, with the company actively testing a Web-based document-processing product with none other than Facebook. Google says 25 million users are logging into its Google Apps suite of services, with Gmail a successful click-marketing portal. Even smaller firms, like Zurich-based calendaring app Doodle, are posting impressive numbers. The company claims something on the order of 6 million unique users a month, with Audi as its first-tier advertiser in some European markets.

"Google has reinvented itself as a cloud computing company of which search is now its biggest product," says Erika Brown, executive vice president for corporate strategy in the digital media practice at Frost & Sullivan, the New York-based consultancy with a specialty in Web marketing. "Very soon advertisers will be facing a new round of products that tie into everything from navigation to word processing. Today's Google won't be tomorrow's."

The office software shot heard 'round the world was fired earlier this year, with Microsoft's seemingly modest upgrade to Office 2010. Yes, the new Office includes features like a social media tool, called Outlook Social Connector. But Redmond also is quietly rolling out a ground-breaking, Web-based new direction: Stripped-down versions of Word, Excel and PowerPoint - dubbed Office Web Apps - will not only be available online for free, but they will be part of 100-percent ad-supported Facebook. That's right, through Microsoft's FUSE Labs, a beta of Office Web Apps now runs as a Facebook application. Facebook users who register can now create, edit and share Microsoft Word, Excel and PowerPoint docs similar to how they create virtual crops, gun for leadership in a virtual gang, or send and receive birthday wishes. Docs for Facebook opens the potential to not only buy banner ads in Facebook, but to develop deeper office-software-based Facebook applications similar to Mafia Wars, Treasure Island and Birthday Cards. How far are we from updates like "Getting ready for a busy day at the office"?

Microsoft declined to comment on the profitability of its FUSE trial, or on the role of advertising in the future of its products. But it struck an uncharacteristically humble and flexible tone in describing its evolving new office strategy.

"The vision for the service is to provide the best possible and appropriate 'document-related' service for the unique Facebook environment," says Chris Bryant, director of office product management for Microsoft Office products at Microsoft. "But our goal is to learn. And to update the service as we learn."

Microsoft is making this move for a reason: It is facing tough competition from Apple. Earlier this year, Apple trotted out Steve Jobs - in all his three-day-stubble, jeans-clad glory - to talk up the new Web-based features in the iWork suite of office tools running on the iPad.

And, of course, there's Google. Earlier this year, the integrated software giant quietly rolled out a fundamental rebuild of its Google Apps suite of office software products. The new Google Apps offers what amounts to a single, Web-based coding environment across word processing, spreadsheets, presentation and intranet Web sites. This common platform creates a single space for consumers to work, and opens the market to independent third-party software makers in a major new way.

Earlier this year, for example, the software giant launched something called the Google Apps Marketplace, essentially an online superstore where Google Apps users can shop for apps that add functionality to Google's core office products. As of early June, Google had roughly 100 apps in the marketplace, with the company taking a cool 20 points off the top of what its host software developers make.

"The idea here is to make an easy and seamless way for not only customers, but developers to create new productivity tools," says Jonathan Rochelle, product manager for Google Apps. "And then open that market up to as much development as it can possibly support."

Not surprisingly, all this office software love has sparked a new wave of office application start-ups. Take Bellevue, Wash.-based Smartsheet. This eight-person firm, launched in 2005, specializes in turning Excel and Google Apps spreadsheets into customizable, Web-savvy documents that small groups can use to solve business problems. So instead of deploying a traditional customer relationship management tool like, say, salesforce.com, Smartsheet pre-creates certain sales management functions - like chat, customer contact data and lead management - and wraps them into a spreadsheet format that can be customized. For marketers, that opens the possibility for sponsored versions of customizable office tools, as well as a full range of hosted work applications.

Sweden-based Nordic River Software AB is taking advantage of the new dynamics of the sponsored office. It just ended a beta trial of a new Web-based word processing application called TextFlow. The tool tracks revisions in Microsoft Word, Google Apps and OpenOffice documents, clearly shows the changes, and allows for managed discussions on revisions that the company claims saves users time. Nordic River is seizing the opportunity in this changing market to test several new payment models where marketers could fit.

The niches being created here are startling. Take Doodle, a European office software start-up that says it is on track to top a monthly average of 7 million unique users. Yet Doodle does little more than support Web-based meetings. It simply connects to a user's existing Google Apps, Outlook or OpenOffice calendars, grabs participants' schedules and hosts a simple time-block discussion between potential participants at an acceptable meeting time. With Doodle now the size of some of the Web's biggest media properties, it is attracting a number of Europe's best brands. The company claims that for campaigns for Audi and Davos, the destination ski area, it is delivering something close to 1.3 percent and 1.6 percent click-through rates respectively for each campaign.

In the end, it's way too soon to declare winners and losers in the new sponsored office. But the age of a virtual workday being beyond the reach of marketers is clearly over.

"Considering what a business has to go through to deploy something like an Oracle server," says Chris Vander Mey, senior product manager for Google Apps Marketplace, "Web-based tools not only offer businesses cheaper ways to do their job, it opens groups up to new ways to work." Vander Mey says that these groups will form powerful tribes that will demand a new generation of tools and experiences.

"Going to work will never be the same," says Vander Mey.