In other words, you're not buying a copy of the code and running it on your computer. So the provider has all your private information.
And if that's "software" then how is Google not a "software" company? All their services are that.
> Google generates 84% of its revenues from ads[2], Microsoft generates 95% of its revenues from software[3].
It's understandable that you missed this, but the distinction you're making is arbitrary. Microsoft can book ad revenue under software and service categories because the software/service is what generated the ad views. They definitely make more than 5% of their revenue from ads.
Percentages are also useless in general. If Google merged with Amazon (which has much higher revenue) then most of their revenue wouldn't be from "advertising" but how would that change their incentives at all? If anything it would be worse -- now they're providing more non-advertising services to you and have the incentive to spy on you via those services to increase their ad profitability.
It's called SaaS, which stands for "Software as a service"[1].
> They're direct competitors operating in largely the same markets and using the same business models.
Google generates 84% of its revenues from ads[2], Microsoft generates 95% of its revenues from software[3].
[1] https://en.wikipedia.org/wiki/Software_as_a_service
[2] https://martechtoday.com/google-posts-31-1b-in-total-revenue...
[3] https://www.microsoft.com/en-us/Investor/earnings/FY-2018-Q1...