When Web surfers take notes, they really like to “take” them–an image from one site, a video clip from another, an entry from Wikipedia, and perhaps even a song or two. For that reason, the blogosphere is full of praise for a new program, Zoho Notebook, released in beta on May 22. In addition to inserting their own text, images, video, audio, spreadsheet data, and other bits of information into virtual notebook pages, users can simply cut and paste in clips from websites. Any entry or page from the notebook, or the entire notebook itself, can easily be published online for anyone to see, or shared with selected friends.

Notebook is the latest offering from the Zoho division of AdvantNet, a maker of software for the telecommunications industry that started diversifying a few years ago. Zoho has become a prolific designer of online software tools, releasing at least one new product every month for more than a year. It boasts 15 product offerings so far, including a word processor, a spreadsheet, a presentation tool, a Wiki, a project manager, a customer-relationship management (CRM) tool, a database, and a project-planning tool.

Bloggers who have tried the software say it’s more robust than online applications offered by Google, and it offers better collaboration capabilities (for example, it lets multiple people work on a document simultaneously or sync spreadsheets with remote data from websites) than products from Microsoft. Zoho’s fans see it as the model for a new generation of Web-based applications that could displace expensive software sold by Microsoft.

A model of the future it may be, having emerged as an early leader in the category of Web-based productivity tools. Still, whether Zoho maintains its lead against dedicated competitors such as Microsoft and Google is about as certain as the fleeting fame of the latest YouTube celebrity.

But for now, Zoho is the suite to beat. A Gartner report released on March 12 placed Zoho at the top of its list of “Cool Vendors in Web 2.0,” five companies that offer “a glimpse into the future of enterprise innovations.” Says Gartner analyst Nick Gall, “Zoho is ahead in the user community and in the technology.”

Zoho Office appears in PC World’s July issue as a winner of the 100 Best Products of 2007 Award. John Wilson, who’s with the London-based venture-capital firm Folio Partners, writes in his blog that “the combined quality and range of [Zoho’s] online offerings is probably unequalled.”

Most of Zoho’s products are free–for now–or offered at a fraction of the cost of Microsoft products. It charges for only a couple of products geared toward small businesses. Its CRM system, for example, is free for the first three users and $12 per user per month thereafter. Zoho plans to keep free versions of its products available for individual consumers.

The name Zoho is a copyright-friendly misspelling of SOHO, an acronym for the Small Office/Home Office market, which is Zoho’s target customer. “We want to be the small companies’ IT department,” says Raju Vegesna, who works as an evangelist for Zoho. “The whole industry of Web-based productivity software is evolving. It’ll be at least four to five years before it goes mainstream, but it’s going to happen.”

The company says that 250,000 people are using its paid products, Zoho Project and Zoho CRM, and 30,000 people are using its free products–10,000 of whom signed up in the three days following the release of Zoho Notebook.

Gartner’s Gall believes that online programs are best suited to people creating Web content or doing heavy collaboration. He uses Zoho Writer to create blog entries and import them into Typepad. And collaborating with Zoho’s multi-user spreadsheet is “infinitely easier” than using Microsoft’s collaboration tools. “I’m an intensive user of Microsoft Office, and I can’t figure out how to use the collaboration tools or insert different objects into Word,” says Gall.

Still, it won’t be easy to displace Microsoft or to avoid the Google juggernaut. “Office is the crown jewel of Microsoft,” says Gall. “I’m skeptical about any company withstanding the Microsoft onslaught.” Blogosphere buzz is not the best indicator of future commercial success, since that crowd is dominated by intensive advocates of doing everything online.

Zoho’s Vegesna, however, sees a lot of opportunity in new customers around the world. “In India there are eight million new computer users per month, and a similar number of new Internet users,” he says, “and they’ve never heard of Microsoft Office.”