New Microsoft Services
Will Rely on Online Ads

Windows, Office to Go 'Live'
With Enhancements Aimed
To Tap a Swelling Market

SAN FRANCISCO -- Microsoft is creating online services coupled with its two major software lines, Windows and Office, which are designed to help the software maker tap into the swelling market for Internet advertising.

The new offerings are an attempt by Microsoft to tie its biggest software franchises to the rich pool of online advertising that has fueled the growth of companies like Google, the Web-search giant. Microsoft has built its fortunes on licensing its software to corporate customers and selling it preinstalled on personal computers.

But a relatively small amount of its revenue flows from online advertising; a market that one Microsoft executive said could grow to $150 billion by 2015 from $15 billion today.

One new offering is Office Live, a set of online services aimed at small businesses with limited computer expertise. The service includes Web-based email and software for collaborating online, and is designed as a complement to Microsoft's Office suite of business-productivity applications.

In another thrust, Microsoft plans to package elements of its MSN online service under a new service called Windows Live. The services included in the new offering, include Microsoft's Messenger instant-messaging service; a new Web-mail service dubbed Kahuna; and Spaces, the company's service for creating the online postings known as Web logs, or blogs.

The offerings are designed to be used on a personalized home page, at www.live.com, and also are linked to an online virus-scanning service called Windows Live Safety Center.

"This advertising model has emerged as a very important thing," Microsoft Chairman Bill Gates said. "We want all software developers to tap into that."

Each of the new offerings will be supported mainly by advertising. Microsoft's MSN service has been developing an online-ad brokerage service that potential advertisers can use to buy ads on MSN's Internet search engine. That brokerage service, called AdCenter, will be the foundation for ad sales on Windows Live and Office Live and other online services, including services run by Microsoft's videogame and mobile-phone units, Microsoft executives said.

Microsoft executives emphasized that the new services aren't replacements to the company's existing Windows and Office products, but rather additions. Office Live, for instance, assumes that customers have Office applications like Excel and Word, installed on their PCs, and adds online elements that could enhance use of the applications.

At an announcement yesterday, a Microsoft executive showed how a small business could share a financial document online with an accountant, demonstrating how changes to the document on a PC at the small business are reflected automatically on the accountant's PC.

Such functions are available to large corporate customers now through more complex software from Microsoft.

Microsoft is offering most of the new services free, hoping that advertisers will support them by buying banner ads displayed on the Office Live and Windows Live services.

Each of the services can match ads to Internet users' interests and Web activities. For instance, if a Windows Live user has his personalized Web site set to include information on cycling, software can direct ads for cycling gear to the site.

Write to Robert A. Guth at rob.guth@wsj.com