Hotmail dies an untimely death

Its name may scream antiquity, but Hotmail was No. 1 till the end.

“You don’t even need to own your own computer to use it,” rang one early Hotmail boast. (Photo by Business Wire via Getty Images)

Born to ex-Apple employees Sabeer Bhatia and Jack Smith on July 4, 1996, Hotmail was the first free e-mail service available via the World Wide Web. Rather than relying on client software installed on individual computers, it could be accessed from libraries, airport kiosks, Internet cafés and wherever else web enabled PCs were springing up. “You don’t even need to own your own computer to use it,” Bhatia boasted. And it was fast and reliable to boot. Early critics clucked that it was funded entirely through advertising, but rapid public uptake revealed user’s cared not a whit. Within two months, it had 100,000 users and finished the year just shy of one million.

Early attempts to convince users to pay for premium services—more secure e-mail, or the ability to send greeting cards—achieved little. So Hotmail kept adding more free services, such as instant messaging and security enhancements. It rapidly trounced competing free services available over dial-up like Juno and Freemark, soon eclipsing America On-Line as the dominant e-mail provider worldwide. This success spawned a raft of other web-based services, including Eudora web mail and RocketMail, the latter of which Yahoo bought for US$96 million. Microsoft, then the world’s largest tech behemoth, responded by snapping up Hotmail at the end of 1997, for a rumoured US$400 million.

Microsoft’s massive brand recognition and user base assured Hotmail’s continued growth, occasional service interruptions and regular security scares notwithstanding. But increasingly Microsoft chafed against Yahoo and, later, Google, which introduced its Gmail service in 2004. Free e-mail became part of a broader conflict involving search engines, content and much else besides—a conflict in which Google increasingly prevailed.

Then Microsoft just gave up. It neglected Hotmail throughout the latter half of its existence, making only superficial updates. Hotmail inboxes clogged with spam, and storage limits crimped users’ ability to send attachments. Although it remains the leading e-mail provider even today (with more than 325 million users worldwide), Yahoo and Google eclipsed it in North America and now have nearly as many users globally. Meanwhile, e-mail itself lost ground as the public increasingly turned to new communications channels— messaging on Facebook and other social media sites, texting on mobile devices like Apple’s iPhone, and using consumer videoconferencing software like Skype. Microsoft, still known for its popular but decidedly unsexy Windows operating system and Office productivity suite, steadily lost mojo as it ossified into a paralyzed bureaucracy whose CEO, Steve Balmer, seemed hopelessly out of touch with consumers.

Microsoft killed Hotmail in late July as part of an attempted corporate revival. It’s survived by its newborn sibling, to which Hotmail users are being transferred. The new service incorporates all of Hotmail’s features plus new ones such as integration with social networks like Facebook and Twitter, not to mention Microsoft’s cloud storage service SkyDrive and its upcoming Windows 8 operating system. (Microsoft says it plans to add Skype, which it purchased last year, at some future date.) Early reviews have been favourable, but Microsoft remains a great distance from rekindling its fire.