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Wednesday, February 15, 2006 - Page updated at 12:00 AM

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Microsoft goes after smallest firms in big way

Seattle Times technology reporter

Internet freebies are back, at least for millions of small businesses being courted by Microsoft.

Starting today, the company's Office Live service will help small businesses set up a Web page, pay the annual fee to register the site's address, host up to five e-mail accounts and provide online data storage — all free.

Office Live is the latest product to be released under a new services-oriented strategy Microsoft announced in November.

It may also be a key weapon in Microsoft's fight with Google. It's a chance for Microsoft to use its software expertise to reach a segment of the online ad market dominated by Google.

The catch with Office Live is Microsoft will sell ads that appear on the control panel that business owners use to log in and manage their sites. As businesses grow and require more services, they'll have to pay for extras such as additional storage or for premium levels of service costing $30 to $50 a month.

Microsoft used a similar approach to hook consumers with free services such as Hotmail and MSN Messenger in the 1990s. Today, it has hundreds of millions of subscribers.

Microsoft is also joining Google and other Internet companies sharpening their focus on small businesses.

Small businesses buy ads on their Web sites. They're also appealing targets for bigger companies such as Kinko's and Best Buy, which pay a premium for ads that reach business operators.

Last Friday, Google announced plans to host business e-mail systems, letting businesses use Google's ad-supported e-mail service with their companies' domain names.

Office Live (www.officelive.com) is targeting smaller companies with 10 or fewer employees.

They could be accountants, shop owners, restaurants or even regular eBay sellers who want their own Web page.

"I think it stands a very good chance of filling a need in the marketplace," said Jeff Lanctot, vice president and general manager at Avenue A/Razorfish, a Seattle online ad agency that works with both Microsoft and Google.

Lanctot characterized Office Live as further democratization of commerce, where online tools and services such as Google's keyword ad system "allow very small companies to compete with very big ones."

He said the small-business relationships Microsoft seeks with Office Live are much deeper than Google's.

"Microsoft would have inroads to these small businesses that would go far beyond the mere marketing relationship that Google would have," Lanctot said.

Microsoft estimates there are 6.8 million businesses in the U.S. with 10 or fewer employees, and 3 million of them don't have an online presence.

"Our goal really is to enable those companies to have a Web site and become visible on the Net, and as they have the need, collaborate internally and externally, and to better manage their business," said Terra Terwilliger, director of worldwide business management in Microsoft's Information Worker group.

Plans are for the service to remain in a "beta" test mode until late 2006, when it becomes available in other countries.

Office Live users don't have to own Microsoft's Office productivity software, but Terwilliger said the service "interacts well" with the desktop software.

The free, ad-supported version includes 30 megabytes of online storage, 10 gigabytes of data transfer a month, basic Web traffic reports and up to five e-mail accounts with 2 gigabytes of storage per account.

Premium versions include up to 50 e-mail accounts, the ability to host intranet sites and more than 20 software applications, including programs for managing customer relationships, employees and projects.

Pricing hasn't been set for premium versions, but it will likely start at $29.95 a month, Terwilliger said.

Terwilliger said Microsoft isn't threatening domain-registration companies, because it will still pay the $8.95 annual registration fee for each Web site created with OfficeLive.

But the company will compete with companies that help small companies create and maintain Web sites.

Will Riffle, owner of Seattle hosting company Adhost, said Microsoft is aiming at different customers than his business targets.

"Our focus is more on businesses that have a more significant Web presence; they're not looking for low-end, shared hosting for the most part," Riffle said.

"If free is their criteria, that's usually not a good fit for us," he said, "because we want to bring enhanced services and enhanced support for our customers."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Copyright © 2006 The Seattle Times Company

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