In his post about Microsoft adCenter, Robert Scoble mentions the growth potential of "advertising-backed software." I'm assuming he's referring to web-based software, but I do wonder how long it will be before Microsoft enables embedding ads in desktop software as well. Switching software to an ad-supported model is something that Microsoft has considered for their own products, so it wouldn't surprise me to see them experiment with this idea (especially since it's an area where they could differentiate adCenter from Google AdWords).
This idea is nothing new, of course. I remember attending a Shareware Industry Conference before the first Internet bubble burst, and the place was abuzz with the possibility of giving software away and earning money from embedded advertisements. Adware companies like Radiate and Web3000 spent big bucks on the conference that year, and some of them relentlessly pestered developers to sign on with them.
It was pretty easy to tell who the adware people were, too: almost all of them were inexperienced guys with nice new suits, all juiced up on the idea of making a killing by piggybacking on our work. For the record, I tried to be cordial when they approached me, but after they kept hounding me I told them that I hated the idea and would be glad to see it die an ugly death (which it did).
Fast forward to today, and I'm seeing signs that the idea is trying to rise from its grave. I guess it shouldn't be a surprise, since software developers are trying to make a living from an audience that increasingly expects to get everything for free - free music, free videos, free software, all supported by advertising (it's all one big media platform, right?).
I still don't like the idea, but it may actually work this time if those involved understand why it failed the first time. One reason it failed was simply because too much screen real estate was given to advertisements, and much of it distracted from the task at hand. But I think the biggest reason it failed was because too many developers deluded themselves into believing that giving their software away meant that they could compromise their customers' privacy (the end result is that adware became indistinguishable from spyware).
And that's a tricky problem. As I've written about before, people are more willing to give up privacy on the web than they are on their own desktop. Advertisers understandably expect accurate metrics, and most people don't seem to care when this information is collected on the web - but they do care if that information is sent from their computer to some web site. So if desktop software is going to carry advertising, someone is going to have to figure out how to give advertisers the data they need without pissing off the people using the software.
In the meantime, I'll stick with the idea of actually selling the software to customers. I guess I prefer being HBO instead of network TV :)