Microsoft Sees Future as Media Network(ITworld.com 5/10/2006)

Microsoft Sees Future as Media Network
ITworld.com 5/10/2006
James Lewin, ITworld.com
Last week, Microsoft quietly announced that it was planning to evolve from a software company into a media network.
People aren't exactly drooling to get the upcoming, delayed version of Windows. Apache recently put another nail in Microsoft's IIS by becoming the leading choice for secured web sites. Firefox looks like it could follow Apache, inexorably eating away at Microsoft's share of the browser market. Companies are deploying Linux servers as alternatives to not just Unix, but Windows. Organizations are even looking at alternatives to Office.
Microsoft's software business is siege...and it looks like the company's attention is moving elsewhere.
Give it Away; Give it Away; Give it Away, Now
Last week, Microsoft CEO Steve Ballmer announced the launch of Microsoft adCenter. The announcement wasn't that exciting, by itself. Ballmer, however, made it clear that Microsoft isn't just updating its advertising service:
"Our close partnership with the ad community is extremely important to us as we evolve Microsoft from a software company into the world's largest, most attractive provider of online media through MSN, Windows Live and adCenter," said Ballmer. "Ad-supported software services are an integral part of Microsoft's plans to give consumers access to a broader variety of digital media, whenever they want and on whatever device they prefer."
According to Microsoft, adCenter is already serving 100 percent of paid search traffic on Microsoft's US sites. The company is also investing in Web analytics, with the goal of providing advertisers a one-stop-shop for buying ads that will be displayed while people check email, blog, use mobile devices, game and other Internet-based activities.
"Why does Microsoft care so much about the world that Google is the leader in?" asks Microsoft tech evangelist Robert Scoble. "The advertising industry is a lot bigger than the software industry. Translation: the MBA's here see a lot more growth potential in advertising-backed software than they do in software that you go to Fry's and buy."
Merril Lynch is predicting online ad spending to grow nearly 30% this year, to over $16 billion. That's just the tip of the advertising iceberg, too. Companies spend about 95% of their budgets offline, but are rapidly moving advertising dollars to the Web.
In other words, Microsoft sees that free services and content are where the money's at.
The Implications for Microsoft Web Software
If Microsoft is shifting its focus to being a media network, software like Internet Explorer and IIS, becomes less important to them. Many companies now view Microsoft-specific Web technologies, such as ActiveX, as liabilities and are moving to alternatives. As this happens, Microsoft's Web apps lose some of their selling points, and also their usefulness as tools for Microsoft.
These apps will probably survive to the extent that Microsoft can use them to promote their media network. IE is in decline, but is still used by most Web users. Expect IE's "innovations" to be hooks into Microsoft online services, like using the search function to drive traffic to MSN search.
On the other hand, apps that don't fit so well into this new vision of the company, like Internet Information Server, will probably continue to fade away.