1. Introduction
This paper studies the evolution
of Internet Email as a product and assesses the
opportunities and challenges that face such
web-based service products. The goal of this study
is to apply the generic product management concepts
and critique their applicability to the world of
internet. The product shall be evaluated in the
backdrop of internet email provided by 3 major
providers - Yahoo! mail, Gmail and Microsoft Live
Hotmail.
As a communication medium, internet email today,
is an indispensable part of daily routines of many a
human. The penetration of email is nearly as high as
the penetration of the internet - as it remains the
most important and most commonly used application on
the internet. Despite being a free product that is
largely taken for granted by its users, it continues
to evolve with more innovative features being made
available through major providers. When email was
first introduced in 1972, there were no customers
demanding the functionality; it addressed a latent
need to communicate. In subsequent years, the
features were driven by a combination of "need" and
"technology advances".
Email is now widely used for official and
personal communications (some countries allow emails
as evidence by law). One cannot imagine a business
card without an email address! More importantly, it
enables several innovative marketing strategies as
it offers a cheap medium to "reach" existing and
potential customers. On the darker side, it is
riddled with issues like spam, viruses, phishing,
privacy invasion and security.
2. Evolution of Internet Email
The earliest messaging system used in MIT since
1965 were MAILBOX and SNDMSG which were used to send
user-to-user messages in the same box. Ray
Tomlinson[1] is credited with inventing email in
1972, when he first used the symbol "@" to address
communications to other computers - this is regarded
widely the advent of emails. By 1974, there were
hundreds of military users of email on ARPANET. The
first significant leap was made when the SMTP
(Simple Mail Transfer Protocol) came into being - it
was a pretty naïve protocol with no mechanism to
authenticate the sender; however, this is still
being used with some modifications. Even today, some
of the original issues continue to be exploited by
spammers and virus writers.
In 1993, large network service providers America
Online and Delphi started to connect their
proprietary email systems to the Internet, beginning
the large scale adoption of Internet email as a
global standard[2]. As the World Wide Web gained
momentum and the need to access emails from anywhere
in the world arose, email began to be offered by web
services providers like Yahoo! and Hotmail. While
initial email systems charged users on a per minute
basis on a dial-up connection; the advent of
internet email almost simultaneously brought about
free availability.
Hotmail, founded by Sabeer Bhatia and Jack Smith
in 1996, was one of the earliest internet based
email provider. By 1997, Hotmail had become so
popular that companies like Yahoo, AOL and Microsoft
were vying to buy it out. Yahoo! and AOL could not
afford the valuation that Sabeer Bhatia demanded for
selling. He
also rejected $150 Million and $350 Million offers
from Microsoft after finally settling for $400
Million in early 1998. Hotmail then became MSN
Hotmail and now called Windows Live Hotmail. It had
over 270 million users worldwide as of 2008[3].
Interestingly, Yahoo!, which was a web-based company
and absolutely needed to be in the business of
internet email, paid only $96 Million to acquire
Rocketmail. It needed to act swiftly as
Hotmail was adding thousands of users per week and
gaining user-base quickly was critical. It went on
to re-brand Rocketmail and launched it as Yahoo!
Mail in late 1997. It included premium email
services (Yahoo1 Mail Plus) which had increased
storage limits on the server, enhanced security
features, archiving of emails, freedom from ads,
more attachments etc.
In 2004, Google entered the arena almost
disruptively by providing a much larger email
storage space, better User Interface and faster
access. Google's entry prompted Yahoo! Mail and MSN
Live Hotmail to jack up their offerings and match
most of Gmail benefits. The string of innovations
that followed Google's entry benefited the end-user
a great deal - for example, all providers now
provide very large email storage (virtually
unlimited) for free. The following graph represents
the latest market share of the 3 biggies in the
internet email space in US. Google is however the
fastest growing.
The key to long term potential of the product in
terms of generating revenues is to gain market share
- quickly. As people use the product more and more,
they get "stuck" to the product. Though mail
standards provide for compatibility between
different email providers, to the extent that emails
can be exchanged and deciphered, they do not allow
for easy transfer of all old/archived emails to
another provider. The bottom-line is that it is
difficult to get users to migrate to a new provider
unless there are clear benefits in the new provider
or serious pain-points that it provably eliminates.
Yahoo and Windows Live Hotmail, both being the
early-birds in this arena, gained the first-mover
advantage that still yields benefits. Both of these
earn a significant portion of their revenues from
paid memberships for their premium email products
(as indicated in the table above). The premise of
this business model was to squeeze the storage quota
for free users and force them to upgrade to premium
when storage limit is reached. Google, on the other
hand, re-wrote the ground rules. It is generating
its revenues through scanning the email content and
pushing highly targeted ads to the user based on
content analytics. Google's strength comes from its
search capability and intellectual property that
includes patents pertaining to serving targeted ads
based on contents (Adsense). As of today, GMail's
revenue generation appears stronger than that of
Yahoo! mail and Windows Live Mail. Google is able to
overcome (as indicated by the growth of GMail's user
base) its late mover disadvantage by providing
innovative slick features and better ads targeting.
However, Yahoo mail and Hotmail continue to have the
advantage of much larger active user base and are
"technically" in a better position than Gmail to
exploit the business model adopted by Gmail - as a
larger user-base would mean more responses to ads.
This is a space to watch out for - we believe both
these companies have the wherewithal to adopt the
content based targeting model and give Gmail a run
for their money. Until recently, they were using
demographics of users (age, country, hobbies... etc.
that the user specified at the time of creating the
account) to display ads and this method results in
inappropriate targeting leading to poor
click-through rates.
An accepted fact in the trade is that while users
are the source of revenue, they normally treat
advertisements around their email as annoyance. The
internet email company thus needs to strike a
balance between displaying annoying advertisements
and providing a good user-experience. Gmail leads
the pack in this respect - their advertisements on
email are very subtle text messages that produce
lease annoyance to the users. Ymail and Hotmail have
banner ads and the screen space is cluttered leading
to less than optimal user-experience. However,
through better content analysis, Gmail is able to
show more relevant ads to the end-users and thus
maintain the revenue potential. The flip side of
better targeting is breach of privacy and users who
are concerned about this shy away from Gmail.
Mail monetization in future is destined to go the
"ads" way; reason - market shares will eventually
stabilize when there are no more new users and the
feature disparity has minimized. From thereon, the
more relevant the ads, the more the revenue
potential! Advertising will become common place and
innovation will be required to do better than the
competition. Companies may adopt a revenue-sharing
model with users to make ads more and more
personalized - for example, when a user sends a
message to another user, an advertisement "item" may
be embedded in the message in such a way that it is
personally relevant to the recipient. Then if the
recipient clicks on the embedded advertisement, the
sender gets to share a portion of the ad-revenue for
that click. Innovation in this field is bound to
open many pathways and the cumulative grey-matter
assets in the big-three will continue to find
interesting mechanisms to generate revenues through
free-web-mail products.
5. Key Features
This section first lists some webmail specific
peculiarities which highlight the product's
intrinsic characteristics and help understand the
nature and context of the study. Then we list some
of the most important features that providers offer
in their product and then comment on how these
features have contributed to the overall success.
5.1. Peculiarities of Internet Email
This section studies some of the unique
characteristics of internet email as a product that
either restrain or propel its growth and adoption.
Standards and Scale induced inertia: The most
basic email communication format between servers is
the SMTP - which is simple and elegant, but not
easily extendible. Any drastic changes to the
protocol would mean that all different email systems
in the world will have to update their code/product
- this is virtually impossible given the penetration
of email. If due attention is not given to this
problem and a change to the core is attempted,
thousands of servers will start rejecting requests
and stir up the entire user community. This problem
has limited the evolution of some of the core
standards as a result of which certain security
issues exist - e.g. emails can easily be faked, spam
invasion is pervasive as the original protocol does
not support sender authentication etc. In future
too, it is unlikely that the core standards will be
altered to fix the problem. Thus, it is the
responsibility of the product to bring in more
innovation to solve the aforesaid problems within
the constraints imposed by the scale of
installations and usage.
Network Effect: If a user's calendar is on Yahoo
mail and email is on Gmail, then the difficulty of
managing the two separately generates a
gravitational pull that will cause the user to move
to only one provider for both the needs. Also, since
it is easier to collaborate with friends using a
common product, if most of my friends are on Gmail,
I will have to create a Gmail account. This is the
reason why quickly building up scale was very
important to all players.
Privacy concerns: Google has been criticized for
parsing user-personal data even if it is only for
ad-targeting the same user. Several privacy
proponents believe that Google knows too much about
their personal life. Google counters such claim on
the argument that the personal data is not
associated with a user ID when targeting and that
the information collected is anonymized before it is
used. They also claim that the scan is automated,
data is consumed in real-time (not stored anywhere
or passed to the external world) and that the emails
are not seen by any human. Despite privacy concerns
Gmail is rapidly gaining market share. Due to the
nature of its business, Yahoo! does not have the
same leverage as Google in this aspect. Since Yahoo!
is essentially a portal that serves varied needs of
its users (including chats, news, weather, real
estate, sports, blogs, pictures, financials etc.),
the privacy concerns from Yahoo! adopting Gmails
email scanning technology verbatim are expected to
be much higher. Yahoo! servers store lot more
personal data of users than do Google's server.
Perhaps for this reason, Yahoo! does not yet scan
emails for targeting. (Note that all email service
provider scan emails for viruses and other mal-ware
- this is not the same as scanning for
ad-targeting).
In general privacy concerns also depend on
geography - customers in Europe for example are lot
more concerned about breach of privacy than US
customers. In a survey done in UK it was found that
40% British believe that free email compromises
their privacy[6] and another 40% were unaware that
their emails are being scanned. On the other side of
the spectrum, a majority of people in India are
unmindful. For the product to successfully monetize
user personal data in future, on a sustainable
basis, due attention to privacy must be given so as
not to breach the invisible line of user alienation.
This threshold is positioned differently for each
competitor - generating a source of sustainable
competitive advantage (in this case, for Google).
Free: The product can no longer be envisioned
without free availability to end-users. Providing
the service for free allows the providers to slack
on any stringent terms of service requirements. For
example, no provider gives the guarantee that when a
user deletes an email, the actual data content of
that email will be deleted for ever - it is thus
possible for "someone (may be government agencies)",
to obtain data that the user thinks has been
deleted.
Some providers continue to charge for premium
accounts; however, studies show this is a declining
trend. For small to medium business customers
however, a premium can continued to be charged for
providing better service, security and customized
experience.
Terms and Conditions: A very important aspect of
free services is that their terms and conditions do
not specify anything that holds them responsible for
protecting user data. The service is based on "best
attempt to recover" and "as-is and as-available"
philosophy. Most readers do not read such lengthy
terms and conditions and signup by clicking the
"Accept" button when prompted. They do not realize
that the place where they store so much of their
personal and important information is not fool-proof
- when things go wrong, the providers shall have no
liability. In fact, it is not uncommon for emails to
not reach there destination; a web-mail user
sometimes finds this out the hard way but can do
nothing about it.
Security: Most users are not aware that the
information they send on email, by default, is not
encrypted and can be sniffed during transit. Gmail
provides a simple mechanism to encrypt all email
messages during transit - however, only the most
sophisticated users are aware of this service. In
terms of other security measures, virus scanning and
filtering for spam is commonplace. Spam continues to
be an annoyance to users and providers - it seems
like everyone has learnt to live with spam.
Also, webmail providers have not been able to
contain phishing (the practice of fooling users into
clicking a link and directing them to duplicate
sites of banks etc., in order to obtain their
passwords). Moreover, new viruses that exploit
unknown vulnerabilities, ride on HTML and JavaScript
and other advanced technologies to infect end-user
computers. There has been only limited success in
averting such dangers.
Data-migration: No provider gives its users the
facility to migrate all emails and other contents
(like calendar) to any other provider. The intention
is for the data to be sticky. People do not notice
this subtle mechanism to retain users. However, this
hardly restricts a user from creating an account
with a competitor - just that the user uses both
accounts simultaneously.
5.2. Features that drive adoption and success
In this section we concentrate on some features
that have had the most influence on success of a
webmail product.
Languages Supported: Given the geographical
spread and reach of the internet, it is imperative
that providers support local languages and all the
webmail providers have support for multiple
languages.
Security and protection: Spam filtering, virus
scanning, password protection etc. are services that
every provider gives. In addition, Google disables
".exe" files (executables) from being sent as
attachments.
Integrated experience for users: Users look for
one-stop shop for meeting all their online needs -
in this respect webmail providers are keen on
providing services like search, chat, photo-sharing,
connections, contacts, calendar etc. from a single
entry point. Users are also keen on reading their
emails from mobile devices and other access
mechanisms. To retain user-affiliations thus,
webmail providers look for various ways to integrate
there services and provide consistent interface.
Unlimited free storage: Most users do not use
more than a few hundred Megabytes of storage over
several years of using email. However, this feature
has become a "hit" among webmail providers from a
marketing perspective.
Browser compatibility: Most webmail features are
designed to work with internet explorer as it is the
most widely used browser that comes by default with
Windows Operating System. However, many users prefer
using other browsers (FireFox, Opera, Safari etc.)
on Linux and Mac systems. Webmail features thus have
to be compatible with all of these browsers - often
this becomes an imposing challenge.
Low-bandwidth version: To enable dial-up
connection users and mobile users to access emails
through their slow connections, webmail providers
need to provide an alternative low-bandwidth
interface that is devoid of fancy features.
Spell-check, Dictionary, Folder/Label based mail
organization abilities, auto-forwarding etc. are
other common features across the board.
6. Competition and Differentiation
While innovation is the key driver to create
differentiation, unless there is a sustainable
competitive advantage in the backend technology, it
is not possible to maintain a sustainable lead over
competitors. The reason is simple - all visible
features can be easily copied. Thus, the source of
competitive advantage has to lie in intellectual
property (patents) and research background that
others cannot replicate without infringing.
Competitive advantage in the web services domain can
have a multiplier effect as well. Google's lead in
core search and AdSense technology provides it with
a head-start in many of its other products,
including Gmail. For example, Google pays OEMs
(Original Equipment Manufacturers) like Dell and HP
lots of money to make Google Search and Gmail as the
default applications that come bundled with
hardware. Now, this is a competitive advantage that
Yahoo and Microsoft will find hard to beat. Because
of anti-trust regulations, Microsoft, despite
virtually owning the entire Operating Systems
market, cannot bundle its technologies with the
Windows Operating System.
Google perhaps lost some of its technology
advantage (of content based targeting) when they
launched Gmail Beta in 2004, by restricting new user
account creation through the means of introduction
only. This impeded Gmail's adoption rate and also
gave an opportunity for its rivals to take a peek at
its product which in turn enabled a quick response
aimed at achieving feature parity. Google could have
rolled out Gmail with the objective of on-boarding
50-100 Million users in the first 6 months[7], thus
taking YMail and Hotmail by surprise. However, this
might have been a well-thought-out strategy by
Google. As discussed earlier, building a large
user-base quickly is critical in the long run to
succeed. Google made a buzz in the market place and
was quick to jump on to marketing Gmail with an
offer of 1GB storage space, unheard of at that point
in time. Riding on the success of its search
technology and aided by its financial strength, it
started building on publicity while continuing to
test the backend and fixing the scalability problem
in the background.
Yahoo! was quick in responding to the Gmail
threat - they quickly acquired Oddpost[8] and using
their technology, launched a fairly successful
desktop-like interface on the Yahoo! mail web
interface. Both these competitors also responded to
large storage space provided by Google - Yahoo! now
provides unlimited storage on its free accounts and
Hotmail provides 5 GB, pretty much matching and
surpassing Google's offer.
Hotmail includes some additional services that
are not offered by the other webmail services. It
contains Audio Player where you can play the audio
clips and voicemails. However, this hasn't really
resulted in any significant buzz in the market. The
reason is because the synergies between a mail
product and audio software really are not cool
enough to get users excited. The lesson here is that
innovation cannot be allowed to run wild in this
domain - to create something that is different from
the competitors and gains universal acceptability is
a non-trivial challenge that product managers need
to have high on their agenda.
Another interesting aspect of Google's strategy
has been to symbolically signal the culture of
continued innovation in their product by displaying
a prominent "Beta!" image right at the top. The
message is that there is more to come and so users
are excited always about what next! This strategy is
also found in Google maps!
Gmail offers a desktop client that uses the email
system to allow users to store files in Gmail
servers but makes them appear on user desktops as a
drive-mapped device. So when a user stores a file in
this drive, the client sends an email automatically
with this document as an attachment. However, this
client did not take off a great deal - not
everything that Google does have to be a great
success after all!
Gmail also differentiates form others by
presenting a unique conversation view - as opposed
to other competitors who display each message as a
separate entity. This enables users to follow a
conversation in a logical manner without having to
search or organize mails on the same topic. This
differentiation was one of the main success points
of Google, though some users continue to prefer the
older model.
Gmail offers POP3 access for free - while other
charge for it! - a consequence of Gmail strategy of
accepting losses on email while continuing to gain
market share.
Yahoo also differentiates its product from others
by offering a unique desktop like view for its
emails. Users can move their email by dragging and
dropping them into folders. Many users simply love
this view, but it hasn't resulted in a big tide
going Yahoo's way, given that Gmail has the
reputation of better search and faster access.
7. Marketing Strategies
Viral Marketing
The challenge of marketing a web-based product is
centered on grabbing a share in the spectrum of
people's attention. Since everyone who has access to
internet can be a publisher, it becomes very
difficult to stand out in the crowd, when everyone
is keen on making noise and getting noticed. In this
environment Hotmail's "Viral Marketing" approach
helped it gain subscribers at an astonishing pace -
in the first 1.5 years, it signed up over 12 Million
subscribers. To achieve this growth, all it spent on
marketing was $500, 000. Hotmail added a message
"Get your free email at Hotmail" with every message
sent by an existing user. This message served as an
advertisement and indicated a subtle endorsement
from the sender. The receiver signed up on reading
the "free email" offer and automatically became a
sales agent for Hotmail's subsequent subscriptions.
New
domain
As user
IDs are rapidly taken away by an ever-increasing
user-base, it becomes difficult for users to find
unique IDs that they would want to associate with
their names. People soon find that any combination
of name that they try is already taken up by someone
else. Users ideally prefer to obtain an ID that is
as close as possible to their real name and simple
to remember. Yahoo recently introduced new domain
names to counter this problem - ymail.com and
rocketmail.com - this is a very forward looking
strategy to gain even more users for its email
service.
8. Product Management Challenges for Next-Gen
Internet Email
Challenge 1: Creating Product Synergies across
the product portfolio.
Internet emails as a standalone product are
destined for failure. Users prefer that they go to a
single website where they can navigate through all
that they would want access to - their emails, chat
window, documents, calendar, contacts, news etc. One
product needs to feed into customer acquisition
strategy for another product such that both help
gain on user engagement. This is good for the
service providers as well because they can gather
more relevant behavioral targeting data if all
activities of a user happen through a single entry
point. Yahoo!, which is essentially a web portal for
all user engagement, has the competitive edge in
this regard. By integrating their chat client (gtalk)
with Gmail, Google attempted to increase the time a
user spends at Gmail and thus gain the ability to
show more ads - both in relevance and numbers.
Yahoo! recently followed the same strategy by
integrating messenger with Ymail!
Challenge 2: Should ad-targeting be made
voluntary?
We suggest that it can be a combination of
voluntary as well as non-voluntary. In addition to
offering paid or premium accounts, email providers
can provide better user experience and extra space
if someone volunteers for the ad. This way, the
targeting can be better and it can generate more
revenues for the providers. From the user
perspective, by allowing ads, she is getting better
services and probably better deals in terms of ads.
Challenge 3: How to serve most relevant and most
unobtrusive ads? How to handle Ad Blindness
As discussed above, ads always need not be
unobtrusive, if there is consent from the users.
Email providers should work on models where there is
consent for the ads. Notwithstanding this, better
trust with customers to have more relevant data and
probably by having a separate menu for ads with
proper categorization within email accounts would be
helpful. Here the basic premise is that customers do
need information and with increasing internet
penetration, online information has become more
important. If information is provided in a proper
way, in the "pull" format, rather than "push"
format, it may be better targeted and beneficial for
all the stakeholders; consumer, providers and
advertisers.
Challenge 4: Emails can be a liability - managing
them is becoming increasingly more complex as
business critical decisions and discussions are
captured and archived. Managing such huge
accumulation of data is becoming increasingly
complex and costly: This is now a given requirement.
If there is no reliability in the service, it could
be catastrophic for the provider. In fact by
highlighting the business continuity capability,
email providers can generate more confidence in the
customers. This continuity can be in terms of
availability, getting archived data on demand.
Challenge 5: To provide or not to provide Email
backup/archiving service: This is debatable as by
providing this service, one of the switching
barriers would be removed. People can shift from one
provider to another much easily. Of-course like
mobile number, email address is also very personal
and would still remain as main switching barrier.
Challenge 6: Survival in the world of twitter and
other messaging mechanisms?
We believe that such servicers are not
substitutes but rather complementary services. Email
providers should evaluate how to integrate with such
mechanisms to provide synergies to users. The main
idea should be to increase traffic and subscribers
to its service.
Challenge 7: 10% of all emails is spam: We
believe that it is part and parcel of the technology
and the cost of remedy would be much detrimental to
the growth of email than to keep it unaddressed. It
is like noise in any communication and with time,
users would be able to automatically filter them
out. Of course, the current spam detection
mechanisms can be improved to reduce this so called
"menace" rather than trying to eliminate it totally.
Challenge 8: A vision beyond email?
The product manager needs to repetitively ask the
fundamental question -
"Email is only a tool to solve an intrinsic need
of the users. What is the real problem? What is the
real need?"
A re-look at the real problem from a new
perspective might end up throwing totally different
perspective. The real problem is probably that the
users need to communicate, to collaborate with other
users in the system. And communication itself is not
the end goal - there are different types of reasons
to need a communication. For example, a
communication could be to pass on an urgent message
that needs immediate action; or a communication
could be to start a lengthy discussion on a
particular topic that needs to be recorded as well;
or a communication could just be a casual update or
a rant; a communication could be intended for a
single user - private and secure; or a communication
could be intended for broadcast. The question to ask
is - does email in its current form solve all of
these problems? Does it make sense to build separate
products that solve different problems - or does it
make sense to build an integrated product that
attempts to solve most problems from a single
interface?
Google is attempting to answer some of the above
questions through its new Beta product called Google
wave (announced as recently as in May 2009)! It
integrates several user needs - chat, email, Return
tocollaboration, games, documents, dictionary etc.
It is much more than an email product - it is meant
to be a collaboration tool, much more than what an
email offers! Also it is real-time - if you update a
document at your desk, your friend will be able to
see it in real-time from a remote location. It also
allows for users to roll back in time and get a
play-back of sequences of events. These features are
very different from anything that is available on
the web and we believe Google and the industry is on
another inflexion point with Google Wave.
