Microsoft to mash-up its web services strategy

Microsoft's strategy in the burgeoning world of ad-supported online software calls for aggressive new business terms to undercut rivals and a familiar game plan of cosying up to developers.

At the company's Mix07 conference in Las Vegas today, chief software architect Ray Ozzie and other Microsoft executives are scheduled to lay out the elements of Microsoft's "software plus services" push, its approach to making money from hosted web services while keeping customers tied to its desktop software.

Microsoft executives will introduce the Dynamic Languages Runtime, software that improves support for dynamic, or scripting, languages in Microsoft tools, according to a person familiar with the plans.

The company will release a beta and website dedicated to Silverlight, its cross-platform multi-browser plug-in for writing media-rich interactive web applications.

Although it's trying to break new ground in software services, Microsoft is working from a well-worn playbook. Its overall goal is to build an "ecosystem" of partners and developers which can build applications that tap into the company's online services and software.

John Richards, director of product management for Windows Live Platform, said: "We very much think of ourselves as a company rooted in building ecosystems as a core competency, and that's what we want to bring to the software-plus-services world."

Microsoft said it will also detail liberal usage terms for its web properties, allowing outside companies to build mash-up web applications that generate as many as one million unique visitors per month for free.

The moves are part of an ongoing transition at Microsoft as it chases online rivals Google and Yahoo! in web advertising businesses and seeks to break into the turf of Adobe Systems, which is entrenched among media editors and graphics professionals.

With its updated business terms, Microsoft is trying to encourage web entrepreneurs and developers to ally with its hosted services, such as Virtual Earth and Live search.

An application can have up to one million unique users per month without having to pay Microsoft. Beyond that, Microsoft will charge 25 cents per user per year.

These generous terms, which are explicitly allowed for commercial use, are meant to drive traffic to Microsoft sites and feed the company's online ad revenue - an area where it lags far behind Google.

If third-party companies that build mash-ups with Microsoft websites exceed one million unique users per month, Microsoft will look to provide advertising to that site, said George Moore, general manager of platform strategy for Microsoft Windows Live.

Jupiter Research analyst David Card said: "Microsoft is rapidly trying to build up their advertising infrastructure and also give a way for companies to build commercial products with it. The twist here is you could pay or dive into their marketplace and let them sell ads for you and use the revenue sharing to pay for the technology licensing."

Microsoft will also open up access via APIs (application programming interfaces) to the online photos and contact lists of its Windows Live Spaces users if they give permission, Moore said.

The development of the Windows Live Platform is part of an ongoing effort, called Windows Live Core, spearheaded by Ozzie, executives said. The idea is to provide services to build applications that operate in the internet 'cloud' and that can tap into distributed sources of information, according to the company's description.

Martin LaMonica writes for CNET News.com