Here's an article that appears in Wired News today:
Free E-Mail Inboxes Get Fatter
By Joanna Glasner
http://www.wired.com/news/business/0,1367,65695,00.html
02:00 AM Nov. 13, 2004 PT
Users of Microsoft's Hotmail, most of whom are accustomed to getting regular sales pitches for premium e-mail accounts, got a pleasant surprise in their inboxes this week: extra storage for free.
To date, Microsoft said, millions of its 180 million or so free Hotmail account holders have received 125 times more storage capacity. The upgrade, extended to users in the United States, United Kingdom, Japan, Italy and Australia, increased inbox size from 2 MB to 250 MB.
Subscribers to the company's premium service, which costs $20 a year, saw their capacity increased to 2 GB. Previously, storage levels varied depending on the offering, but typically didn't exceed 100 MB.
The upgrade in storage comes as free e-mail providers are bracing for the launch of Google's Gmail service, which will offer 1 GB of free storage. Industry analysts say Google's service, which makes money by selling advertising linked to e-mail content, has forced rival providers to start giving users more for free.
"They're basically trapped," said Sara Radicati, president and CEO of the Radicati Group, a market research firm that tracks e-mail trends. If free e-mail services don't offer storage levels that are reasonably competitive with Google, they'll see their user base significantly dwindle.
Radicati believes web-based e-mail providers will have to give up on the idea of making money by selling extra storage. Instead, they'll have to rely almost entirely on selling ads.
"The only compelling reason for people to go to the premium services was the storage, and now that reason is gone," she said.
The mere announcement by Google in April that it would begin providing e-mail service sent rivals scurrying to rethink their offerings. In June, Yahoo increased storage capacity for its free web-based e-mail service from 4 MB to 100 MB.
Nathan Tyler, a Google spokesman, declined to disclose when Gmail will be available to the general public. The company has been conducting an extensive beta test for the past half year, but has not said how many Gmail accounts it has given away so far. Tyler said response to the beta launch has been "overwhelmingly positive."
When Google sent out its first invitations to join Gmail, the e-mail addresses were so much in demand that some recipients were able to auction them off for as much as $200 on eBay. Today, coveted Gmail addresses are still traded on gmail swap, where people post offers of goods and services, many of them facetious, in exchange for accounts.
Now that other free services are offering upgraded storage, Radicati thinks fans of web-based e-mail will be less prone to defect to Gmail. While one gig of storage is a compelling freebie, 250 MB or 100 MB is more than enough to suit most users' needs, particularly given that most people do not use free web-based services for their primary e-mail account.
