Microsoft adapts Office Live into a low-cost SMB Web host

Feeling its way through the nuances of the Web applications market, Microsoft is shifting gears yet again with its Office Live Small Business service, this time lowering the fees and adding features for businesses establishing Web presences.

What had started a few years ago as Microsoft's first steps into the unexplored (for it) territory of Web-driven consumer applications, has transformed into something altogether different than an alternative to Microsoft Office. This morning, the company's long and winding strategy for the Office Live brand took yet another turn, with Office Live Small Business now being retooled as a service to enable businesses to set up their own Web sites, buy and sell goods and services online, and track their customers' preferences and online behavior.

The move takes the middle tier of Office Live services that Microsoft began offering last October for nominal fees, and relocates many of those services to the free tier. Customers can now establish Web presences using a Web site builder tool for free. Up to 100 branded e-mail accounts are now available for free for the first year, $14.95 per additional year. In addition, free e-mail accounts have been upgraded to 5 GB of storage (Web site storage remains at 500 MB) and online applications (yes, they're still there) come with 500 MB of free storage, upgradable in paid increments. Also, new tools have been added to enable synchronization with Microsoft Outlook.

As Office Live Small Business director of marketing Michael Schultz told BetaNews, his company's objective is to become a one-stop shop for SMBs to establish their online presence.

When SMBs typically undertake the job of moving online, Schultz explained, "they go somewhere to get a domain, they may go to another company if they decide they want to do commerce, they may even go to another company to go do e-mail marketing to get newsletters done. We're pulling all of these services together into one simple-to-use and affordable service that can really give small businesses everything that they need to effectively take, promote, and manage their business online."

For example, he offered, an SMB might decide it wants to send out an e-mail marketing campaign to its customers regarding a special promotion. "What I can do is set up a conversion tracking point in my reports, and then it will allow me to match that up to the Web site traffic that I'm seeing. Now, I have a view [of] the cost...to get that e-mail campaign out the door, and I can see any sales that will come in."

For now, those ROI reports may not be to the exact penny, Schultz said, though Microsoft is working to refine its tracking of pay-per-click -- the effectiveness of a marketing campaign run from an Office Live site, that utilizes inventory from MSN, Live Search, Ask.com, Excite, and Lycos sites. Now you see why Microsoft is happy with the idea of making Office Live Small Business free or close to free, for the same reason HP sells printers at cost or less: It's setting up customers for a new, more viable revenue stream.

Right now, Schultz said, that revenue stream stands at about 550,000 customers, and is growing.

"What we're hearing from customers is that just getting started tends to be the hardest part. They don't really know what pages they should have, they don't know what they should put on them," he told us.

Using himself as a subject for a typical example, he continued, "So today, I can get my Web site set up, I have a list of standard pages that a Web site would have. I can select from an industry template, so it could be sports and recreation or professional services or hospitality, where I already have pre-loaded some templates that I can leverage. I have copy that I can follow, and it really makes it very simple for someone who doesn't know HTML or has never built a Web site before, to be able to get a Web site up literally in 15 to 30 minutes. From there, they can add more pictures, a custom logo."

An SMB can now attach a Live Spaces blog to its Office Live Web site and customize its appearance so that it fits in with the motif, Schultz added. And templates will be available to enable customers to write back.

"Today, we have a 'Contact Us' form, and what we've done is provide a direct linkage from that 'Contact Us' form to our Contact Manager application. That had been part of our subscription services, and we're making that free as well. So I can now take leads that are coming off my Web site, have that populate my Contact Manager application, and even set up alerts to inform me when there is a new lead or customer coming in."

Those alerts, Schultz said, can automatically send e-mails to an SMB's administrative address, on specific conditions that the business sets up in advance relating to a customer's behavior. For example, it can send an e-mail if a designated customer -- perhaps someone who's expressed interest before in something for sale -- returns to glance at it a second time.

Microsoft will be making available a hosted e-commerce service enabling SMBs to sell products directly through an Office Live site as well as on eBay, Schultz said, for a fee of $39.95 per month. But there will be no bandwidth limitations for customers, he added, as the company's servers have apparently yet to run into any trouble with slowdowns on account of heavy traffic.

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