Microsoft?s acquisition of the free email service Hotmail strikes another blow in its bid to outstrip online rival AOL. The purchase is designed ?primarily to fit in with our Microsoft Network, MSN,? said Shirish Nadkarni, director of product planning at MSN.
This is one of a string of moves Microsoft has made to increase the attractiveness of MSN, whose subscriber base is only one-fifth the size of AOL's. As a ?component? of MSN, users will be able to check their MSN mail from a Hotmail account, and the deal also gives Microsoft access to the email company's 9.5 million customers.
But AOL claims it is not concerned by the deal and has no immediate plans to lower subscription charges in response. Jonathan Bulkeley, UK managing director, said: ?AOL has over 10 million subscribers worldwide, five times larger than MSN. We must be doing something right. We are not convinced that Microsoft?s acquisition of Hotmail will change anything in the short term.?
Brian Murphy, industry analyst at The Yankee Group in Boston, believes the buy is important for access to a new customer base. He said: "The advert-supported Hotmail will allow Microsoft access to its 9.5 million subscribers."
However, Nadkarni stresses that Hotmail was bought not for its mailing list but so that Microsoft can offer a ?key service on the free side to people who use the Internet. It is accessible from any location - work, school, or Web TV. All you need is a Web browser.?
But Nadkarni concedes that it was important that Microsoft ?get access to a service that has incredible momentum.?
He said: ?It?s a key indicator of the popularity of the service that it has done little advertising internationally and a large portion of its subscribers are international. It has grown by word of mouth because it is robust, reliable and the only free email service scaleable at that level, which is why we bought it.?
Microsoft intends that Hotmail will complement its corporate email products, Outlook and Exchange.
?Many governments and corporations have restrictions so Hotmail will be beneficial outside the work domain because it is private. Also if they leave their job they will still have their own permanent email account," added Nadkani.
But he admits that Hotmail does have limitations. ?There is a limit to the amount of messages you can store. Today it is 2Mbytes, but it will be increased in the future. There are some capabilities you can get for a richer email service by paying. For an $18 annual fee business users can access their Hotmail account via Microsoft?s Outlook or Outlook Express POP3 clients and download their email offline.?
Nadkarni believes that email is a ?key driver to why people use the Internet? and that this will help increase the use of PCs - clearly in Microsoft's interest.
However, Murphy feels that Hotmail will do little to push PC penetration into homes. ?The price point on PCs has a long way to go before penetration gets above 40 per cent,? he argued.
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