• by Shankar Gupta , November 3, 2005

In what could be the first step toward the wide-scale distribution of ad-supported software, Microsoft this week said it intends to offer users software free of charge.

"Given the fact that the market's booming, the media's booming--the opportunity to take ad-funded software live around the company is going to be a great experience," said Eric Hadley, MSN's senior director of advertising and marketing. "It's a very large commitment to advertising."

Microsoft said Tuesday it intends to soon launch Office Live and Windows Live, and will make ad-supported software services available through both products. Starting with Live.com, which currently is in beta testing, MSN's advertising sales team will be selling advertising--keyword and contextual, display and rich media--on desktop-based properties, including Live Messenger and Live Mail, as well as the Live.com portal site itself.

Hadley said MSN's upcoming adCenter will be used to monetize the new properties, and the user sign-in data and other third-party data collected will be used to help better target ads to users. Hadley touted the transparency of the targeting process; in certain placements, users will be able to mouse over the ads that are displayed, learn why the ads were targeted to them, have some input in what ads they will see, and offer feedback about the ad, which will then be made available to the advertiser.

The Ball State Center for Media and Design predicted an upcoming surge in ad-supported software in a recent study. "Although historically there have been technical limitations to utilizing the desktop...these are rapidly falling away," the study stated. "This, combined with the amount of time people spend using software, suggests that efforts to use the desktop as a marketing platform and communications platform are likely---for better or worse--to become more commonplace."

Industry expert Jim Spaeth, a partner at Sequent Partners, said Microsoft's move shows that the company intends to monetize users' desktops. "Just as television has been the dominant, 'must have' medium for reaching consumers in the home and radio the equivalent for the car, the computer is the key channel in the workplace," he said. "Microsoft's recent announcement signals their intent to monetize the media potential of this channel which they alone dominate."