I recently spoke with Windows Live Senior Director of Product Management Ryan Gavin to discuss Windows Live Wave 3. Ryan runs consumer product marketing for Windows Live and reports to Brian Hall, who reports in turn to Bill Veghte, the Microsoft senior vice president in charge of the company's Windows business and online services.

Windows Live Wave 3, in case you're not familiar, is a "product wave" that will eventually encompass all of the platforms for which Microsoft makes Windows Live products and services. This includes the PC, the Web, and mobile devices. At this early stage in Wave 3, however, all I can discuss is the PC side of things, which involves a new version of the Windows Live suite that first shipped late last year (see my review). Information about updated versions of the Windows Live online services and mobile offerings are forthcoming.

If you've been following along with Microsoft's online offerings over the years, you know that the company has changed course a number of times, but perhaps never so dramatically as this past year, when Microsoft made its abortive on-again-off-again attempt to purchase Yahoo! for its Internet search business. The software giant has since given up on that merger of resources and is going it alone. And though many have criticized Microsoft for its actions over the past several months, Ryan told me that few had accurately put search in perspective. Much is made of the fact that Google's empire relies solely on its advertising search prowess, for example, but the truth is that Internet search is responsible for just 3 percent of the time people spend online. So while Microsoft will continue working on search, it also feels that the other 97 percent is important as well.

Breaking down the average Web user's time online, Microsoft sees that 32 percent of that time is spent viewing content, 33 percent is spent engaged in online commerce, and 33 percent in communications tasks (like email, IM, or social networking). They can break down these broad categories further as well. For example, email takes up 9 percent, IM 13 percent, and social networking 10 percent.

The strength of Windows Live today is its email (Windows Live Hotmail) and IM (Windows Live Messenger) services, which are used by over 460 million people every day. Oddly, Microsoft's usage percentages are much higher in Europe than they are in the US--making Windows Live, comically, the David Hasselhoff of online services. So they see huge market share in countries like France, where 92 percent of IM users are running Windows Live Messenger. They're even bigger in Brazil, but I don't have a joke prepared for that.

Breaking down the barriers

Microsoft's position in the communications portion of the online market is quite strong except in social networking, though the company will likely make some pushes with Windows Live Spaces as part of Wave 3. That will become clearer in the coming months, of course. For now, what we can at least discuss along these lines is what Microsoft is doing to break down the boundaries between the various activities that people engage in online. Microsoft calls these "silos," which makes plenty of sense, and its efforts in this area relate very directly to something I've been working with quite a bit lately myself: Cross-service data interoperability. (See my series, Managing Your Life In the Clouds, for details.)

What Microsoft wants to do, quite simply, is create a single list of friends, or contacts, for each user, and make it such that this list will work across all of the products and services you use online, whether they come from Microsoft or not. "No one vendor can do it all," Ryan told me. "Our contacts are spread to heck across all the email, IM, social networking, and other services we use online. What we need is one list of friends that is auto-synced across everything we use, contextually available at all times, and integrated. We need a platform that allows third parties in, and a way to ensure that people can take their data with them if they leave."

This platform for Web services is the vision for Windows Live going forward. We saw hints of this cross-platform future in Wave 2, with such things as Yahoo! Flickr integration in Windows Live Photo Gallery, for example, and with Windows Live Writer's amazing ability to work with just about any blogging engine there is. Going forward, such examples will be the rule not the exception. "This is a universal need," Ryan said. "Fundamentally, the value we offer from a consumer perspective is that we're going to put it all together. What you do on the Web will continue. But we'll help you manage it across services."

Looking at Windows Live specifically, Microsoft is making some strategic bets as it moves to this future. The company will offer a best of breed and integrated suite of applications--the successor to the Windows Live suite it first shipped last year--with optimized experiences on the PC, phone, and Web. "We've talked about making everything available from everywhere," Ryan noted, "but that's not enough. It has to be sticky and relevant." He used Outlook as an example of the Windows Live model: It started off as an email application, but became, over time, a work life management system as more and more people began spending their entire days inside of the application. Microsoft would like for Windows Live to become a life management system for consumers, regardless of which applications and services they choose to use.

Wave 3 rolls in

Windows Live Wave 3 will eventually consist of new PC applications, Web services, and mobile solutions. Today, as this product and services wave begins, the company is only talking about the PC apps side of the equation. This takes the form of a new version of what I call the Windows Live suite, and this year that suite is being bolstered by some interesting new additions. (I was also briefed on the online services piece of this wave but will defer that discussion until Microsoft gives me the go-ahead.)

"These are rich applications that 'light up' Windows," Ryan told me. (Pay attention to that "light up" language, because it's something you're going to hear a lot about when Microsoft begins discussing Windows 7 publicly as well.) It consists of new versions of Windows Live Mail, Photo Gallery, Messenger, Toolbar, Family Safety, and Writer. And it also includes, for the first time, a product called Windows Live Movie Maker which, as it name suggests, replaces the Windows Movie Maker application in Windows Vista.

"The Wave 3 vision is 'keeping your life in sync,'" Ryan said. "That's the totality of Windows Live."

In this first, apps-based phase of the Wave 3 rollout, you can see how Microsoft's communications ambitions are turning the corner. The company is tuning the integration of its IM, email, and social networking experiences with a single contacts list that is automatically synced from service to service no matter how you access that information. Microsoft is also integrating its FolderShare peer-to-peer (P2P) synchronization solution into its Wave 3 products though that feature is actually disabled by default in the beta release we saw this past week. (A reference to "Windows Live Sync" appears in the installer code for the Windows Live Wave 3 Beta. That will be the final name of FolderShare.)

Ryan told me that Microsoft is targeting two key user types with Wave 3: functional organizers and butterflies. Functional organizers are those who have multiple accounts everywhere but would like to maintain things centrally. "Their stuff is spread out all over," Ryan said, "and they need management to be simpler." Butterflies are even more active. These are the people who Twitter all day long and jump in an out of different online experiences regularly. As with Windows itself, Windows Live will be geared toward two disparate user types, providing interfaces that make sense to both groups.

Next: A look at the Windows Live Wave 3 applications.