With Windows 11 featuring annual updates since its launch last year, Microsoft Corporation's (MSFT) operating system (OS) business appears intent on catching up with competing OS updates, especially those on Apple Inc.'s (AAPL) Mac systems.
- Advertisements on the File Explorer in a new Windows 11 tested version may indicate Microsoft's future plans of using ads on its OS.
- Placing ads to promote Microsoft products could prompt Windows' enormous user base to adopt the company's products that are lagging behind their competition.
- Ads dilute user experience, but as an added way of enhancing sales, Microsoft may use them to improve its business across several segments.
However, a chance discovery of an advertisement on the latest Windows 11 testing may suggest a new wrinkle in the software giant's OS environment. The ad appeared on Microsoft's File Explorer on Windows 11 and urged users to check out the Microsoft Editor. According to Brandon LeBlanc, a senior program manager for Windows, the ad was not supposed to be published externally. However, there was nothing in his remark that would rule out ads on Windows in the future.
Microsoft Windows, like other operating systems such as the Mac's iOS or Linux, comes prebuilt into new devices, and its cost is priced into the price of the device itself. More importantly, with a few exceptions, it has always been ad-free. If the Windows operating system starts launching ads, user experience could be diluted.
Earlier Experiments With Ads
Earlier in 2017, Microsoft had placed ads for One Drive—its cloud storage and file management service—in its File Explorer. The action was supposed to improve user experience on Windows 10 by integrating Microsoft's cloud offering. However, although users could opt out of receiving ads, the ad was seen as an attempt to cull two revenue streams from Windows: from the price of the software itself and from advertisements for other Microsoft products. Even then, user experience was diluted due to ads on the OS.
Ads to Address Lackluster performance of Skype and Teams, Lagging Cloud Product
As remote work and virtual meetings spiked in 2020 and 2021, Microsoft's existing products Skype and Teams fell behind and were unable to match up to the video conferencing features of Zoom Video Communications, Inc. (ZM), collaborative features of Slack, and the ease of use of Alphabet Inc.'s (GOOGL) Google Meet. Even after Microsoft made Skype and Teams interoperable in 2020 and integrated Teams with its Office 365 productivity suite and Outlook, the service failed to draw the crowd away from competitors such as Zoom and Google's integrated offering of Gmail, Meet, Chat, and Voice. Microsoft's cloud service, Azure, also lags Amazon.com, Inc.'s (AMZN) Amazon Web Services.
Advertisements on the file explorer may convert some users of Windows to other Microsoft products and services. If Microsoft does decide to display ads on its File Explorer, it will not be the first to do so—other technology giants such as Apple and Alphabet also bombard users with ads. Microsoft has been experimenting with ads in several ways, from placing ads on the Windows lock screen to promoting its apps in the Start menu. However, ads in the file explorer would benefit from the enormous reach of Microsoft Windows.
However, Windows is nearly ubiquitous, and as the most popular operating system by a wide margin and as the "go to" OS for those who do not like iOS, it can have incredible influence on future consumer behavior. With ads flashing on the trusty file explorer, users may adopt or convert to other Microsoft products, especially those that integrate on its cloud, before the company's competitors such as Dropbox, Inc. (DBX) and even Alphabet get their foot in through the door.