There are rumors suggesting Microsoft will soon unveil its hosted/on demand/Software as a Service strategy where many of its applications will be provided via the Internet.
If Google is the strongest competitor in this space — and they are… The reason Google could be more successful than Microsoft in providing hosted apps has to do with the size of the advertising network Google has amassed.
Since Microsoft has a much smaller ad network, it is at an immediate disadvantage to Google in its ability to monetize such applications.
This rumored announcement however coincides extremely well with a Yahoo acquisition as the immediate addition to Microsoft’s ad network means Microsoft can instantaneously boost its ad revenue potential.
I should point out however that to date, Microsoft’s web applications have impressed me more than Google’s. I am not a fan of sparse user interfaces. In the end, this may not be so important as Google on the web seems to have the same level of sex appeal that Apple has in consumer electronics.