Office on the web is actually great. They did the hard work of making it work with most of the features you want to use. It's definitely better than Google Docs. It's a daily driver for me.
Yes, sometimes I'll switch over to the corresponding desktop app, especially if I want to copy paste images e.g. select a range of cells in Excel and paste them as a picture in Powerpoint. The switch from web to app is usually seamless. (I'm on a Mac).
It is still quite far behind the native version, every time I think I can do everything on the Web version, as soon as I need some advanced formating on Word/Powerpoint, or more powerfull expressions on Excel, I end up downloading and further editing on the native version.
Google Docs is okayish if all I need is Office 97/Works kind of experience, Office 365 I would probably place it around Office 2013.
