Hotmail (1) - Land of the free

 

Imagine an email account which can be read from anywhere in the world, can be set up in minutes using a name of your choice, and is free. Is it any wonder that in just 16 months Hotmail has lived up to its name, wooing nearly nine million users in more than 200 countries?

Hotmail's growth is the stuff Internet dreams are made of. Based in Fremont, California, it was founded by Sabeer Bhatia and Jack Smith, both of whom spent previous incarnations in FirePower, a Silicon Valley start-up company, and before that in Apple, working on PowerBooks. Hotmail (www.hotmail.com) is now adding nearly 1.5 million "members" per month.

Its launch date - July 4th - was symbolic: Hotmail offers users independent email, paid for by advertising. It's what Americans love to call a "win-win" situation. Advertisers like it because new subscribers supply personal details, so ads can be targeted at specific users. Furthermore, because it's Web-based, their Web sites are only a click away. In return for putting up with these ads users get all the services of a modern mailer for free.

But the number of subscribers may be exaggerated, since users can have more than one account. Steve Douty, vice president of marketing, admits the company doesn't keep track of this, but reckons most people only have one account. He prefers to talk about "page impressions" - fresh downloads of entire pages - which are a more realistic measurement of activity than hits, which measure the number of graphic elements downloaded. "Page impressions are most important," he says, and they obvi- ously track sign ups. He says there are now 18 to 20 million page impressions and nearly 2.5 million logins a day.

Hype or no hype, Hotmail's growth has been impressive. Within a year it claimed five million subscribers. Two-thirds of its users are in North America, but more than a million are now in Europe.

Driven by what Smith calls "the three Ps of email" (Performance, Performance, Performance) the company scooped the Dvorak Technical Excellence award earlier this month. Accepting the award, Bhatia, CEO and President, said: "With 60,000 new subscribers signing up every weekday, we expect to grow to 12 million subscribers by year-end, and to at least 20 million by this time next year."

Bhatia's confidence is not misplaced. America Online (AOL) is still the world's largest email provider (just), with around nine million subscribers, but is being criticised for poor performance and lost messages. AOL admits it takes one minute to send mail between two AOL accounts, and anything from 15 minutes to several hours for mail to travel between AOL and non-AOL accounts - and there were periods last summer when the email volumes were so intense "we simply couldn't handle it."

Not so for Hotmail. A new service, HotmailDirect, offers subscribers one-second delivery times for messages to other Hotmail users. This allows online conversations between users. The next upgrade, due this week, will include a feature called FriendsOn, which tells when your friends are online.

Since many Hotmail subscribers already have accounts with ISPs, it is not a direct threat to AOL. Not yet, that is, for Hotmail plans to provide what Douty calls "redefined" free online services. These will include private text-based chat in about two months. It also recently teamed up with McAfee to offer continuously updated virus protection for email and attachments, for $2 a month. Hotmail's gradual expansion will require additional resources, but it has already raised several million dollars in venture capital. Ad revenue also looks set to continue growing steadily. The CPM, or cost per thousand (M) page impressions (yes, netizens are now reverting to Roman numerals!) is $17-$35, depending on the level of targeting, and there are currently around 40 advertisers. But competition from other free email services is growing. After Juno (www.juno.com), with over three million accounts, Four11's Rocketmail (www.rocketmail.com) claims 750,000 subscribers; and Yahoo!, already running Yahoo! Mail (mail.yahoo.com), is flexing its muscles - it recently bought Four11 for $4 million.

As Yahoo! tries to catch up with Hotmail it can hope to pick up customers frustrated that, with nine million Hotmail account names gone, the account name of their choice is available elsewhere. I've got mine!

Eoin Licken is at: eoinl@iol.ie and (more recently) elicken@hotmail.com