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MSN Leaked paper reveals a worried Microsoft

Google Wants Microsoft DeadAn internal confidential Microsoft strategy paper has documented a drop in sales of full packaged Microsoft software. Microsoft gets only about $2 for each copy of Works that is bundled on new computers. The standard version of Microsoft Money isn't even a break-even proposition, and the company has had to heavily discount its OneNote application in order to get computer makers to include it.

Calculating that the average person keeps their copy of its entry-level productivity suite Works--a kind of "Office lite" for consumers--for about three years, Microsoft reasoned that it wouldn't take a lot of ad revenue to justify moving the product to an ad-driven model.

Worldwide sales of full packaged software--which includes Works, the Encarta encyclopedia, digital imaging software and Money--dropped by 7 percent in fiscal year 2004, the paper says, noting similar trends for fiscal 2005.

The MSN strategy paper argues that subscriptions are not the way to go, pointing to the success of Google's ad-supported Gmail. In the MSN-drafted paper, Microsoft points to controversial adware maker Claria, noting that Claria claims ad rates six to 20 times those of traditional Web advertising because of its ability to target to a user's activity.

The OneNote note-taking program represents an interesting example of, at the extreme, the types of products that could be funded by advertising. It is one of the Microsoft Office application that users keep open longest (second only to Microsoft Outlook e-mail).

Read - Microsoft eyes ads - CNet