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Microsoft Office has huge market share – an estimated half a billion users, according to this interview with Microsoft manager Betsy Frost.

But it’s difficult to compete with free applications offered by well established Web software-as-a-service providers. Today, Google announced its web-based slide show application. This wasn’t a surprise. I mentioned Google’s office apps on 19 April and 23 February. These web-based apps don’t have all the features of Microsoft software, and Google doesn’t support third-party plugins. Plugins are software that hooks in to Microsoft Office applications to provide additional features.

When does free beat market share?

But web-based apps do allow users to share documents online, instead of emailing versions of documents. There are security concerns, of course. Google’s applications are tied into the company’s single signon (SSO) authentication system. Google does offer corporate and educational versions of these services, but storage is centralized in Google’s massive data network. Google isn’t offering a database product, but one could argue that the entire Google office suite is really a vast database full of XML-formatted documents and messages. Corporate customers pay Google US$50 per seat each year for the web-based office applications and email. I haven’t seen how Google controls document sharing on academic networks, either.

Web-based office software is becoming a key success factor for the largest Internet search sites. Email, calendar and address book applications are a logical offering. In most industries, companies must use email, but it’s often cheaper to let someone else run the servers. According to the New York Times, Yahoo just purchased Zimbra, a developer of web-based email services. Zimbra’s annual pricing is reasonable: $28 per seat for corporate customers. Universities pay $1 per student account, and $8 per employee account. At those prices, more universities are outsourcing their email systems. I discussed Google’s academic email services on 11 April. Of course, Yahoo is the dominant webmail provider with 181 million unique visitors each month. Google has only 18 million.

The New York Times reported today that IBM will launch its own downloadable version of Sun’s open source office suite. Users still have to install the IBM applications, so the versioning problem still exists.

But IBM is offering its software for free. Oddly enough, IBM resurrected the Lotus Symphony brand for this product. Of course, IBM is offering technical support for corporate users, but not for free.

In the past, I’ve posted links to articles in the New York Times in this blog. I read the Times’ web site several times a week. I got into the Times Web habit in 1995, actually. It beats waiting for the Sunday Honolulu Advertiser to reprint dated, abridged versions of the same articles.

There was always one problem with linking to the Times – their archiving policy. After two weeks, most recent Times news stories shifted from free access to subscriber-only access through a paid service called Times Select. Launched in 2005, Times Select was a bold revenue play on a web site that currently attracts 13 million unique visitors each month.

Authoritative news has its price

When I pointed users or students to a New York Times article, I wasn’t asking them to subscribe to the Times or buy the article. Readers didn’t like paying US$50 a year to use the Times archives. Yes, print subscribers received a free Web subscription, as did some educational subscribers. The Times also determined that more Web readers were following links from Google, Yahoo and other search engines to Times content. If the user wasn’t a Times subscriber, they might not see the Times content or ads.

Keep in mind that advertising helps subsidize much of the alleged “free” content on the Web. The bandwidth required to connect users to a web server can be expense at times. The servers, programming, and other services required to keep even a small web site going cost money.

Advertising, in turn, helps fuel electronic commerce. It’s far less expensive for an electronic merchant to advertise online, especially when the ads can be targeted to specific websites, users, and geographies. Customers who will consider an online merchant are more likely to read their news on the Web in the first place. It’s expensive to convert readers of print newspapers or television viewers to an online business model.

I run ads at the bottom of my site’s web pages more as an experiment than anything else. The revenue that I receive is laughably small, but I don’t pay that much for my web hosting at DreamHost, either. Google announced today that it is expanding its advertising business to mobile platforms, and other Web advertising services are moving in the same direction.

In the end, management determined that the Times would be better off without its subscription service, letting these readers read stories for free while viewing advertising sold by the Times.

Free the content – sell more ads

The Times announced today that Times Select will end tomorrow. Web site visitors will get free access to sections of the Times’s news and column archives, including the last twenty years. BoingBoing and Kaaawa blog iLind.net ran a quick mention of the change as well.

The Wall Street Journal may be the next major news daily to free its Web content. The Journal’s subscriber-only policies were more expensive and more restrictive than the Times’. The Journal are also one of the few newspapers that made money from its Web operations– at least US$50 million in subscriber revenue each year, according to this article in ZDNet. New owner Rupert Murdoch is already pushing MySpace towards targeted advertising based on user profile data, according to this NY Times article (via BoingBoing). I would not be surprised if the Journal and Dow Jones changed their business models.