At a press conference in San Francisco at which Windows Live was also launched, chairman Bill Gates and chief technical officer Ray Ozzie presented Office Live along the lines of hosted Sharepoint.

It’s not hosted Office, as many people may have expected, but it is a way for Microsoft to leverage the Office brand and ecosystem to further its ambitions in the online advertising world.

A web-based service, Office Live will offer small businesses the opportunity to create and host a web site and email infrastructure for free. Once out of beta, the service would be ad-supported, with the potential for customers to share revenue.

A new collaboration tool called Mojo would allow workers to share part of their desktops and edit each others documents live over the Internet.

In addition, there would be 22 rudimentary business applications to use, along the lines of customer contact management, with the opportunity for third-party software developers to extend and add new applications.