Hotmail, following Yahoo's lead, is going to offer two gigabytes of storage to paying customers. They'll also be jettisoning graphical advertisements for paying users, substituting text ads in their place.
That leaves us wondering: what text ads? Presumably, advertisers who are accustomed to the pay-per-click ad network space, currently dominated by two players (Overture and Google AdWords), will have to get up to speed on a new Microsoft-centric PPC offering.
So the web-based email race is locked in a three-way stalemate. Many users will decide based on inertia; some will still gravitate to Google out of loyalty to the company. Finally, many who haven't used web-based inboxes in the past could begin doing so as the feature sets overcome many of the shortcomings of traditional email clients. There should be plenty of room for innovation here. There is little reason to believe Google's pace of innovation won't be faster than Microsoft's: after all, Microsoft bought Hotmail, it didn't develop it. And it's been sitting on that goldmine, refusing to upgrade it significantly until competition forced their hand.
Posted by Andrew Goodman
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