Ads and Subscriptions are the Future … of Windows (Premium)

When Microsoft transitioned Office from a standalone software offering to a subscription service called Office 365, Microsoft fans worried about a similar fate for Windows. But the future of Windows is even worse than we’d feared: it’s not just about ongoing subscription payments, but also about more and more in-box advertising.

And yes, I will once again point out that I called it on the latter development: when Microsoft added the first advertising to Windows over 10 years ago in Windows 8, I described it as a “slippery slope,” meaning that the use of advertising would only increase—and then snowball—over time. And boy, is it hard being this right about something. Advertising in Windows has exploded in recent years. And recent developments indicate that it’s only going to get worse. Much worse.

This is troubling. But before getting to the details, I’d like to pause—and breathe—and consider how we might get out of this sinkhole. And to do so, we need to understand the problem that Microsoft is trying to solve here.

Which is that Windows is effectively free. Not literally—you do pay for it when you buy a new PC—but effectively, yes, because our PCs last longer than ever, and the current and previous Windows versions, Windows 11 and 10, are free upgrades. And Microsoft—understandably—would like to monetize this massive user base of over one billion users more than once every several years.

I respect that. But what we can debate is how they monetize their customers. After all, no one is going to pay for a Windows upgrade anymore, so that ship has sailed. But the approach Microsoft has taken—let’s call it “death by a thousand cuts”—is unappealing. There are the ads, of course, which are sometimes obvious and sometimes promoted as “suggestions.” There is crapware in the form of sponsored app shortcuts for things like Spotify, Disney+, WhatApp, and the like. There are privacy invasions like tracking that you cannot disable. And a web browser that pops up like an evil groundhog even when you’ve configured another default, and then will remind you incessantly to switch back to “the Microsoft defaults.”

Even worse are the more subtle upsells. A “Premium Edition” subscription for Solitaire & Casual Games that costs $1.99 per month or $14.99 per year. A Clipchamp Essentials subscription that costs $11.99 per month (and still can’t export in 4K). Xbox Game Pass, at $9.99 to $14.99 per month, depending on which tier you choose. OneDrive additional storage, which can be had via Microsoft 365 Basics ($1.99 per month) or, if you’re already paying for Microsoft 365 ($69.99 or $99.99 per year), an additional $1.99 to $9.99 per month depending on the tier. These little offers are suddenly all over Windows, and, not to beat a dead horse, this too is a slippery slope: there will only be more as we move forward.

But don’t take my word for it: during a conference call for Microsoft’s fiscal 2022 third quarter earnings last year, the company was asked a rather prescient question about the durability of the PC market, which had surged but was then just starting to show the weakness that would haunt the industry for the rest of 2022.

“On the commercial side, I think it’s well understood that Windows is the socket for Microsoft 365,” Microsoft CEO Satya Nadella answered. “And on the consumer side, the intensity of the usage has gone up. When you think about 500 million users engaging with Microsoft Start, that’s not the type of engagement we had [before the pandemic]. And so, with the large install base, now we have a significant room there. The browser share growth, we have significant room there. And then of course the subscription attaches, whether it’s gaming or whether it’s productivity or suite. That’s kind of how I look at what we are going to do, at least in the immediate future.”

In October, we learned that Microsoft intends to double the size of its advertising business, and while ads in games are a big part of that strategy—yet another reason Microsoft wants Activision Blizzard—so, too is Windows and those billions of eyeballs. That’s the real reason that Microsoft forces Edge to open in certain situations even when you’ve selected another browser as the default: those are the times when the content you’re viewing is on Bing or MSN, surrounded by Microsoft advertising.

But I have a solution that should please almost everyone.

In fact, I’ve discussed this solution with Microsoft CFO Chris Capossela: Microsoft should let customers pay a monthly or annual fee to clean Windows of the advertising, crapware, and spying. It could do so as a standalone subscription perhaps, but a better approach, I think, is making it part of existing Microsoft 365 subscriptions. It can be added to the list of perks one gets for paying, and it would benefit Microsoft more since it would lead to those customers using more of their products and services. A win-win, if you will.

Unfortunately, Mr. Capossela pushed back on this idea, noting that it would be bad form for Microsoft to let customers pay to fix issues that it isn’t willing to concede are hostile. But there’s no reason to debate this, as Microsoft already offers “ad-free Outlook.com” as a perk of Microsoft 365. How on earth is this different? (It’s not.)

Of course, this solution won’t please some people, particularly those who can’t afford to pay. And I hear you, though the notion that the haves often have better experiences than the have-nots is nothing new, nor is it particularly unique. How many times have you silently cursed as the flight attendant closed that flimsy curtain between you and first class on a flight? It doesn’t feel good to be excluded.

But that’s why this solution makes sense: it’s about Microsoft’s bottom line, and one way or another, we are going to pay to use Windows. I’d like that payment to be explicit and to result in a better experience. Or to at least have that option.