The news: As global PC sales decline and distributed work shifts to the cloud, Microsoft is faced with the challenge of innovating to drum up adoption, per The Register.

Why it’s worth watching: Microsoft Windows is the dominant desktop operating system in the world, but the company has struggled to push adoption of the latest Windows 11 operating system.

• Windows 11 runs on fewer than one in six PCs, per StatCounter. This equates to 15.44% of all PCs globally.
• 71.29% are still running Windows 10, and the downward trend of new PC adoption is hurting Windows 11 transition. 
• Support for Windows 10, which ends in 2025, signals that Windows 11 would be Microsoft’s core OS product for the next decade. The problem is that more than half of existing PCs can’t upgrade to Windows 11, per Lansweeper.
• Slow adoption and users retaining older PCs longer could push Microsoft to extend support for the older OS, or the company could just ignore the older OS and let customers deal with fragmentation.

Ad-supported Windows PCs around the corner: Microsoft has already peppered Windows 10 and Windows 11 user interfaces with a slew of ads for apps and services. The move has led to some fallout, especially for business customers.

• Microsoft is exploring cheaper, cloud-connected, and ad-subsidized PCs.
• The company is already powering Netflix’s ad-based subscription model. 
• The shift to ad-supported PCs was alluded to by CEO Satya Nadella during the recent earnings call. Nadella said the company’s five-year goals include focusing on moving ads through their own offerings.

What’s next? Qualcomm predicted that 2024 would be the year for Windows on Arm. This could mean more-affordable PCs with all-day battery life, comparable to Chromebooks, that are ideal for consumers and the educational market.

• There may be a market for cheaper, subscription-based PCs, especially in emerging markets.
• Microsoft has already transitioned key software and services to the cloud under Microsoft 365 subscriptions. Adding hardware and OS software to the subscription model could make sense for some institutional customers.

What’s the catch? Ad-supported PCs aren’t a good fit for the educational market or for corporate users. Given that Chromebook sales are cratering, it may not be a good market for Microsoft to expand into now.

​​Trendspotting: Microsoft isn’t the only company considering advertising to expand revenues. Apple has started showing more ads in the App Store. 

• Apple is also bringing ads to Apple Maps, Books, and Podcasts, and exploring launching ads on Apple TV+.
• Amazon has offered cheaper, ad-supported versions of its Kindle e-reader for years.

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