Can Free Web Applications Lead To Revenue?

Google's been offering free software applications that are similar to Microsoft Word and Excel. In turn, Microsoft has announced it too will offer free Web versions of its popular word processing, spread sheet and other programs. Is there a chance for the companies to eventually make money off these free Web applications?

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STEVE INSKEEP, host:

Google has been offering more and more software applications similar to ones like Microsoft Word and Excel, except Googles versions exist only on the Internet and they are free. In the face of this competition, Microsoft announced that it, too, will offer free Web versions of its popular word processing and spreadsheets and other programs, which is raising eyebrows in the business world. So, we brought our tech commentator Mario Armstrong back to talk about it. Hi, Mario.

MARIO ARMSTRONG: Hi, Steve. Thanks for having me in.

INSKEEP: I should just mention - I mean, Microsoft Word and other programs are whether I want them to be or not, are part of my life.

ARMSTRONG: Thats right.

INSKEEP: Word is what I type on. Outlook is where Im reading email. Theres the Excel, which is a kind of spreadsheet. But now we have these alternatives, which I how do I get to them?

ARMSTRONG: Yeah, so you and about 80 percent of other businesses out there, according to Forrester Research, fall into that same category of being used to those programs that you mentioned. The Internet has shifted the playing scape here in terms of programs that would normally be downloaded can now look the same and feel the same online.

INSKEEP: You have brought a laptop computer here, and youve taken it to a Web site here with

ARMSTRONG: Google docs.

INSKEEP: Mm-hmm.

ARMSTRONG: And as you can see here, this is kind of a Web interface. So youre in a Web browser as your program. Doesnt it look similar to what you would expect in a word processor, some of the same menus on the screen?

INSKEEP: Yeah. I have different type fonts I can choose and various things like that. Its kind of pared down, I will say. But most of the options seem to be there. Sure.

ARMSTRONG: And thats a great point. The paring down is the difference that you see in a lot of these office alternatives that are on the Web, if you will.

INSKEEP: Just so I understand, Microsoft Word at least the way that it did work at one time is that, I mean, thats a program thats physically written into my computer somewhere. In fact, I might in years past, have even bought it on a disc and shoved it into the computer.

ARMSTRONG: Thats right. Absolutely.

INSKEEP: Now its never in the computer? This program, the document that Im writing is always somewhere in the ether?

ARMSTRONG: Thats what some of these alternatives are offering, companies like Zoho.com, StarOffice from Sun Microsystems and also, as we mentioned, Google Docs. So there are more than several companies that are actually looking at creating alternatives that all you need is the Internet in order to interface with that program.

INSKEEP: You know, youve come by with those Netbooks that dont have a lot of memory, dont have a lot of size. I imagine these are very appealing to somebody with a Netbook, because you dont need a lot of memory to use them.

ARMSTRONG: You hit it dead on the head. I mean, Im holding the Novell Netbook in here, and youre absolutely right. These are not really built. I mean, theres no CD-ROM on this for me to really install software. So this is perfect for using Web applications. You hear the term cloud computing and things of that nature all the time. This is what theyre talking about, being able to then run programs and even, to some extent, leave your data out on the Web.

INSKEEP: So, this is free. How do they make money?

(Soundbite of laughter)

ARMSTRONG: Were still trying to figure that one out, Steve.

(Soundbite of laughter)

ARMSTRONG: You know, it - well, its highly competitive right now. I mean, advertising - you might start seeing advertising, and that plays well into Google and some of these other competitors that are used to doing advertising alongside of their

INSKEEP: Search engines. Sure, yeah.

ARMSTRONG: Thats right, absolutely. And then enhancements for other services or features, or things that you may like to have, you may have to pay for.

INSKEEP: Of course, then theres the problem for Microsoft, because they are already charging people for this system. And now theyre giving it away for free.

ARMSTRONG: And now theyre giving it away for free. But this is a market that Microsoft has to kind of be in. Because of their dominance in this desktop software, they need to show that they can be in the online presence, as well, with these other companies.

INSKEEP: Are they going to undermine this huge, huge, huge business they have selling software for every PC?

ARMSTRONG: We dont know until this really happens. But my - I suspect we will not see them cannibalize themselves. I suspect that we will actually see this be a smart move for them, and heres why. Large businesses arent comfortable with moving all of their applications to the Internet. Theres a lack of security, a lack of dependability at times and things that they cannot control. So theres a big variable there. And number two, switching office types, going from one type of software that youre used to to another

INSKEEP: Oh.

ARMSTRONG: for thousands of users could be a huge task.

INSKEEP: And if youve got a big company, yeah, youre not going to do that. Or youre going to do that very hesitantly.

ARMSTRONG: Thats right. You know, this has a lot to do with mind share, as well as market share for Microsoft. It really does.

INSKEEP: Mind sharing?

ARMSTRONG: Just being in, you know, the heads of users and consumers, because if other people start using these alternatives and they get used to that and Microsoft doesnt have a complimentary service, theyre going to start to become forgotten about.

INSKEEP: Suddenly, this gigantic brand could be crushed.

ARMSTRONG: It could be, you know, unnecessary.

INSKEEP: So, youre not a big company with hundreds of employees. Youre the host of a public radio program called DIGITAL CAFE. Have you shifted your operations over to the online system?

ARMSTRONG: Absolutely, I have. In fact, I have a producer for my show thats located in California, and one of the key things that we can now do is collaborate with one document, and in some cases real-time collaboration.

INSKEEP: Does it mean youre both typing at the same time?

ARMSTRONG: Absolutely.

INSKEEP: So you could type a word, and she could erase it.

(Soundbite of laughter)

INSKEEP: And you could type it again and say, no, no, no. And she erases it again. You could do that.

(Soundbite of laughter)

ARMSTRONG: In theory, you could do that, you know. You know, she does probably erase some of my stuff quite often. Thank God she does.

(Soundbite of laughter)

INSKEEP: Mario, always good when you come by.

ARMSTRONG: Thanks so much for having me.

INSKEEP: Mario Armstrong, host of DIGITAL CAFE and our regular tech commentator here on MORNING EDITION.

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