Bringing Live to Life for Partners

How will Windows Live translate to new business for partners? We'll have to wait for an answer.

The most significant new Microsoft initiative in many years was raised at the company's partner conference in July, but what we heard about the Live initiative wasn't what you would call a red carpet. More like a slip 'n slide.

Live is supposed to be the Google killer, the tectonic shift into online applications, the brave advance into a subscription paradigm that will generate billions of dollars a few pennies at a time. Yet, after listening very closely to Microsoft executives describe the program and the partner opportunities over several meetings in early summer, I don't see much that matches that picture.

It's not that Microsoft can't create an online platform that partners can use, or that it won't market the heck out of it, or can't give hundreds of millions of Windows and Office users one-click access to a Live world. The problem is that we don't have answers to the most basic questions about the business.

How big is this market and how fast will it grow? Sure, if you read the numbers for the early movers, like or Siebel, revenue growth looks good. Unfortunately, the bottom line doesn't look anything like Microsoft's. Even Google, the supposed favorite for just about anything to do with new business on the Internet, hasn't come up with a single non-search app that has made more than a trivial contribution to its bottom line. I like their stuff, but I've never sent them a penny, other than whatever they have nicked from the half-dozen ads that I click on over the course of a month.

Where does the revenue come from? Microsoft seems fixated on advertising revenue, supplemented by subscription revenue. But this is a slide that Microsoft has slipped on before. It's still not a first-tier player in Internet advertising, and it has tried -- and killed -- more online subscription services than anyone.

How will partners make money? The most developed idea is that partners will refer customers to Microsoft's ad distribution network, will get a share of the resulting revenue, and will put ads on customers' Live sites. They'll also get a share of the Live subscription revenue.

This is trouble.

First, it's not clear that a subscription service from which both Microsoft and partners will be trying to maximize their revenue will ever succeed in a competitive marketplace like the Internet. Competition is a click away. Microsoft can set the price high enough to reward both itself and partners, and then watch its market share get eaten by competitors who don't need to factor in the partner's share. The result: no money for partners. They could set the price low enough to gain market share. Again, no money left for partners.

Second, how does competency in advanced networking, security software or database management, to name a few, equip you to sell advertising and Web site hosting? There are plenty of people who are already losing tons of money doing this, and with extra training, you can join them.

Another option is for partners to build online applications or add-ons like SharePoint templates that customers can use. I give this idea some credit. It builds on the skills of at least some partners. Excellence can be rewarded. There's a business case for browser-based applications that use lightweight clients, don't require software distribution and are accessible from anywhere.

Unfortunately, this only raises more questions. Once I've built my dairy-farm optimization application, do I get a big check from Microsoft, a big check from the customer or a lot of small checks from everyone? And if it's really profitable, will Microsoft watch my back so other partners (or even Microsoft itself) don't imitate me? And why do I need Microsoft anyway? If I'm the one who's finding the customers and if I can build a compelling Web application, why wouldn't I put my app on my own server and keep all the money?

Microsoft says it will explain all this over the next year. Good. We need an explanation.

About the Author

Paul DeGroot is principle consultant with Pica Communications, which provides consulting services for customers with complex Microsoft licensing issues.