Google Spreadsheet, What will MS do now?

Good news for the web 2.0 world today. Google has released (via limited beta) Google Spreadsheet, their answer to Excel on the web. While it might not be as feature rich as people would like, that fact that it can read and write .xls files is a good start, not to mention the online sharing capabilities.

So this begs the question: What will Microsoft do to counter this latest blatant attack on Office? Wage a low cost war? (Google Spreadsheet is free.) Offer an ad supported web version of Excel for personal use? (Possible but not until after Vista launches.) One thing is certain, this really ups the stakes in the personal productivity space.