Microsoft, Google, Yahoo, Lycos In Free E-Mail Space Race

Welcome Guest. | Log In| Register | Membership Benefits

June 24, 2004 (11:22 AM EDT)

Microsoft, Google, Yahoo, Lycos In Free E-Mail Space Race

Only a week after it had no comment on upping the storage capacity of its Hotmail e-mail service, Microsoft early Thursday announced it was boosting the allowance to 250MB to follow similar moves by rivals such as Google, Yahoo, and Lycos.

In the latest development in the free e-mail space race, Microsoft will take Hotmail inboxes from the current 2MB storage allotment to 250MB beginning in early July, said Blake Irving, an MSN vice president.

Users will also be able to send attachments as large as 10MB, said Irving in a statement. "By boosting Hotmail storage, we're helping ensure that customers can pick their e-mail service by looking at the overall quality of the service experience," Irving said. "With these new offers, storage will not be an issue for Hotmail customers."

Hotmail's premium service, dubbed MSN Hotmail Plus, will also be updated to offer 2GB of storage space -- what Microsoft called "virtually infinite storage" -- and the ability to send files as large as 20MB. Hotmail Plus will be priced at $19.95 per year, considerably less than earlier Hotmail storage packages, which cost between $30 (for 25MB) and $60 (for 100MB).

Also part of the Hotmail refresh will be enhanced anti-virus protection. Previously, Hotmail only scanned incoming messages for malicious code, then gave users the option to delete the infected mail. In July, however, Hotmail will automatically disinfect the attachment so that users can safely read infected messages.

Hotmail's storage increase comes after a number of rivals, including Yahoo and Lycos, reacted to April's announcement of 1GB allowance by Google, which is still testing its Gmail service.

"This is certainly a competitive response to Gmail," said David Ferris, an analyst with Ferris Research. "People do need more [storage] space, and I think that for the average person, 250MB is a reasonable amount."

The space race, though, is a step backwards for Web-based e-mail providers, said Ferris. Providers have been trying to wean users from free offering and get them to pay for the service. "But that's been difficult," he said.

"As users become more proficient, they want more and more. They want more functionality, and will continue to want more functionality, including things that we can't think of at the moment." That makes it increasingly harder for Web-based e-mail services to migrate users from free to paying services, a trend in vogue as one service after another either raises storage capacity, drops its price for add-on packages, or both.

Among the functionality that users are looking for today is better anti-virus protection, said Ferris, an angle seconded by Joe Wilcox, an analyst with Jupiter Research.

"Microsoft is better off playing up anti-virus protection and the [larger] attachments feature," wrote Wilcox in his Microsoft Monitor blog, rather than try to compete with Google on storage size alone. Or even with Gmail's anticipated advanced search skills.

"Gmail's appeal isn't just storage, it's search. Until Microsoft is confident MSN is up to the task of searching huge e-mail boxes, I wouldn't go marketing head-to-head with Google over capacity."

MSN has been spending serious dollars in research and development on better search technologies to compete with the likes of Google, and is expected to roll out a new engine before the end of this year.

Also on Thursday, Ask Jeeves entered the space race by announcing it would bump up e-mail storage capacity for users of its Excite, My Way, and iWon portals to 125MB.

Free e-mail users of those portals -- which Ask Jeeves acquired in May for $501 million -- will see their storage allowances jump from 3-6MB to 125MB in September, said Ask Jeeves' executives. Excite users who subscribe to the premium Excite Gold service will get 2GB or space, the same as Hotmail, and at the same $20-a-year price.