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6/24/2004
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E-Mail Space Race Heats Up

Hotmail is boosting its storage allowance to 250 Mbytes to follow similar moves by rivals such as Google and Yahoo.

Only a week after it had no comment on upping the storage capacity of its Hotmail E-mail service, Microsoft said early Thursday that it's boosting the allowance to 250 Mbytes 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 in-boxes from the current 2 Mbytes storage allotment to 250 Mbytes beginning in early July, said Blake Irving, an MSN VP.

Users will also be able to send attachments as large as 10 Mbytes, Irving said 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 2 Gbytes of storage space--what Microsoft called "virtually infinite storage"--and the ability to send files as large as 20 Mbytes. Hotmail Plus will be priced at $19.95 per year, considerably less than earlier Hotmail storage packages, which cost from $30 (for 25 Mbytes) to $60 (for 100 Mbytes).

Also part of the Hotmail refresh will be enhanced anti-virus protection. Previously, Hotmail scanned only incoming messages for malicious code, then gave users the option to delete the infected mail. Starting in July, 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 a 1-Gbyte storage 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 space, and I think that for the average person, 250 Mbytes is a reasonable amount."

But the space race 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 is better anti-virus protection, said Ferris, an angle seconded by Jupiter Research analyst Joe Wilcox.

"Microsoft is better off playing up anti-virus protection and the [larger] attachments feature," Wilcox wrote 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 year's end.

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 125 Mbytes.

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

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