Here’s what’s showing up for the first time in these pictures.

Personalisation – We’ve talked about the new Wave 3 header before, but what we haven’t really talked about is how it can be personalised. With Wave 3, the header allows for theming across Windows Live using “scenes”, meaning that the UI you see in Messenger is also the UI you see on the web. As the image on the right shows, users can select their own background image – maybe its time for some LiveSide themed screenshots? :)This was discussed in one of our first ever interviews with Phil Holden over 2 years ago, so its great to see this finally come to fruition. 

Simplified header: As well as having the new Wave 3 UI, the header at the top of the contact list has also had a redesign, removing a lot of the clutter. Gone are many of the buttons like Windows Live Call, Windows Live Today, Spaces, Mobile messaging etc, leaving just a simplified Hotmail notification icon on the right hand side. This is something we’re not so surprised about, we heard a while ago that usage of these extras was very low (think <1% of all users). Here’s the Messenger v8.5 header for comparison.

Improved Personal Status Message (PSM) – The PSM was first introduced in Messenger v7 along with the music PSM, showing your contacts what you are listening to. Since then not much has changed, despite some intrepid investigators noticing that there are Office and Games icons contained within Messenger for use in this area. With Wave 3 this upgraded PSM allows users to show both their regular status and music updates at the same time.

The new buddy icons  - There’s two parts to this. The most obvious point is the removal of the messenger buddy icon to be replaced with a coloured tile. Then there’s also the new new online presence indicator, which both colours the tiles and surrounds display pictures in the form of a glow. See the Favorites at the top of the contact list for an example of this. Presumably green is available, orange is away and red is busy - could we also see this implemented at the top of the new Wave 3 header for online services?

The “What’s new feed”  - This is my pick  for underrated killer feature. Much like the existing Spaces homepage and the Facebook news feed, this displays notifications showing what your contacts are doing. Check out what playlists your Zune friends have made, or what files they’ve added to Skydrive for example. This should drive cross-platform integration in a big way, and turn Windows Live into a truly cohesive web platform. Can you tell I like this? See also the individual contact feed in the conversation window showing new photos are being shared online.

Tabs – No not the kind you chat through, the kind that links to other online services which Microsoft wishes to promote. These have been moved from the side of the contact list down to the bottom, just above the advertisement, saving screen real estate and making them less intrusive.

We ran through some of the other new features already in our first post about Messenger Wave 3, here’s a quick summary: 

• Favourite Contacts - these are the contacts you are most interested in. Positioning this special group of contacts at the top gives you at-a-glance information about their status and activities 
• Groups – Allowing groups of contacts to communicate with each other through Group IM, this update takes the existing multi-party chat functionality to a new level. Of course it also opens up others scenarios such as sharing files and photos. 
• PhotoShare application - This is a new application that allows users to transfer photos to their contacts for viewing. The main part of the conversation window shows a large preview for one of the photos, with the right hand side column showing smaller previews for the upcoming photos

Note as we mentioned right at the start of this build, the chatter online is that current internal builds are at M2. Logically if these show the M3 and expected final UI, they must then be mockups. This means there may be some tweaks before the final release, but all being well it should look very similar.

(From LiveSide)No, not the web version, that’s Windows Live Hotmail. We spoke about that one already. This time it’s about the desktop client, Windows Live Mail. That one is going to get a new version in Wave 3 too.

We noticed something that will make many of you very very happy…

No, your eyes are not deceiving you (though the picture is a little small!) - Calendar synchronisation will be integrated into Windows Live Mail!

(note this is the XP version, not the Vista version - hence the blue titlebar)

Movie Maker will work with both photos and videos allowing users to produce simple to make videos, for free.

Windows Live Movie Maker will offer expanded capabilities to what is already offered with Windows Live Photo Gallery, upgrade the current Windows Movie Maker offering, and move Movie Maker (and from what we hear Mail and Photos as well) out of Windows. That can only be a good thing for the teams shipping Windows 7, giving both fewer bugs and therefore fewer delays in shipping.

And yet for the past year and a half, with a new management in place, and new organizational connections with Windows, the utter mess that had plagued Windows Live was slowly but surely being cleaned up.  Some services were shut down (Expo, Favorites), others were relegated back to MSN (Live Search), and still others were just kind of forgotten (remember the rogue little service called Windows Live Barcode?).  Now, with the advent of Wave 3, for the first time, Windows Live should have a coherent structure and a coherent face.

And done right, Windows Live is and can be a compelling set of services.  No one else offers anything so complete, with common storage, common contacts, a common interface, and a common user experience on the desktop or online, all accessed by a single sign-on.  And no one else will offer such a complete range of products, for both the web and desktop: Mail, Messenger, Calendar, Events and Groups, Photos and Movie Maker, Spaces, and storage through SkyDrive, all managed by a single sign on and a single contact list, with granular permission controls.

Add Live Mesh into the mix, where all of these services are synchronized across your devices and the promise of Windows Live, and software plus services, becomes even more compelling.  For the first time in three years, we’re about to see the promise of what Windows Live should have been all along (and granted, three years ago that wouldn’t have been possible, even with a better message).

But the problem with Windows Live has always been more than the technology.  Microsoft has an image problem, and there is a section of the tech-savvy population that would do almost anything rather than use Windows, or Microsoft.  Soon, we hear, Microsoft will attempt to work on that, with $300 million in advertising about to be spent on image. 

While it would be foolish to expect an image that has developed over years of poor decisions, under-handed and monopolistic practices, and just plain bad management to change overnight, there may be no better time than the present to begin to move Microsoft into an era of software plus services.  Apple, who has always seemed to have a golden touch, has been beset recently with a number of glitches and gaffes, and the shine may be wearing off the apple a bit. 

Google faces its own challenges, and has yet to find a product other than Adsense that makes any money.  And of course the early adopters are the ones who are most likely to steer clear of Microsoft, and the most vocal.  If next year Microsoft cleans up its image, puts a better face on Windows 7, and offers some great choices to users of Windows Live all easily accessible from Windows 7, will the clamor to move away from Microsoft be as strong?

Of course image comes from much more than marketing.  After “the Scoble years”, where we caught a glimpse of what it meant to be Microsoft, it’s back to business as usual, and the only speak is corporate-speak.  The only thing Microsoft employees seem to blog about anymore is their vacations, and that’s telling.  There are exceptions, of course, but after the $300 million runs out, we’ll be right back with the same old monolith.  Microsoft simply can’t change its image unless it changes its culture, and so far there isn’t much indication of that.

A big question remaining for Windows Live is whether users really want or need a single all encompassing service, handled by a single and all encompassing provider.  The truth is it’s not that hard to take the best of a number of different services and mash them up together,  and the truth is that Windows Live is not the best in breed in a number of the services it offers, including the current state of photo sharing, blogging and even mail, if you’re a GMail fan.

Open ID, while it hasn’t caught on yet, may provide similar functions to a single sign-on, and any new service without an API isn’t worth launching.  While the new management has worked hard to get the “trains to run on time”, the truth is that while the Windows Live train was off the tracks the rest of the world may have moved on to automobiles.  Why wait for the next train (especially one that refuses to publish a timetable) when you can just get in the car and go?

We expect Windows Live to provide a better set of services with Wave 3 than it has up to this point, by far.  We’re excited about what we’re hearing, glad to hear that the last three years seems will soon be behind us.  However Microsoft is still too late to market, too insulated from the world, and too short on features to really compete in an agile, lightweight, fast-paced world.  We hope that having cleaned up the mess, the work can really begin.

-Alex