Race for space

It’s a race for bigger mail boxes triggered by search engine giant Google. Soon after it announced a mammoth 1 GB mail box for its upcoming e-mail service, rivals Yahoo and Rediff have followed suit. Is a bigger mail box the sole way to win over subscribers or will features be the key? SRIKANTH RP tries to find out

CALL it the Gmail effect. Soon after search engine giant Google announced the beta launch of its free e-mail service offering a mammoth 1 GB mail box to its subscribers, rivals Yahoo and Rediff followed suit. While Yahoo announced a 100 MB mail box for its subscribers (not for IDs ending in ‘co.in’ for the moment), rival Rediff took the market by surprise when it announced a 1 GB mail box for free. Effectively, this means Yahoo has increased its storage space from a measly 4 MB by 25 times to 100 MB. Even Rediff has increased its storage space from 5 MB by 200 times to 1 GB. And the last man standing, Microsoft, also seems to have given in to the temptation by announcing a 250 MB mail box, up from a meagre 2 MB.

While Yahoo, Rediff and Microsoft deny that Google’s Gmail has anything to do with the increase in storage space, most analysts believe that two factors have changed the rules of the game. One, storage costs are becoming cheaper by the day. Storage service providers say that the cost of network-based storage, which was around thirty cents per MB three years ago, is now hovering around five cents per MB. Says Sandeep Dutta, director, strategic partnerships and marketing, Network Appliance India, “The current cost is around $0.05 per MB (5 cents). The rate has fallen dramatically over the past couple of years, 30 percent every quarter according to my observation. This is driven by the fact that spindle capacity has doubled every six months in the same period for primary storage where the drive type is Fibre Channel. In the case of ATA-based secondary storage devices, the current cost is around $ 0.015 per MB (1.5 cents).” The greater the number of users, the cheaper the storage. For example, global players like Yahoo and MSN have a big advantage compared to Indian portals as their costs are distributed among lakhs of e-mail users. Two, Gmail’s features coupled with the concomitant media hype has threatened traditional players in the webmail business.

Says Rohit Verma, executive vice president and chief marketing officer, rediff.com, “As a utility, e-mail is the most used application. With a 1 GB mail box we are promoting the concept of an e-mail address for life. By becoming the only service provider in the whole world to offer a free 1 GB mail box, we believe that the number of users signing up for mail would go up by a huge number. Typically, more users means more business as e-mail users start shopping online and also start using paid services such as match-making.” Rediff’s new offering means that a single e-mail can be as large as 10 MB. For paid users, Rediffmail Plus and Rediffmail Mobile, the storage space available will be 2 GB each with POP3 access and no ads.

Even Yahoo, one of the biggest players in the Internet space, announced the launch of a 100 MB mail box to keep its subscribers from moving to Google’s Gmail. But Yahoo India’s country manager Neville Taraporewala denies that the move has anything to do with Gmail: “Storage is really a non-issue. What most people are looking for is reliable access with value-added features like spam and virus protection. The features will separate the men from the boys.” He believes that unlike other players, the scale of the company’s operations in 24 countries makes the launch of a 100 MB mail box more viable for Yahoo.

Agrees Mahesh Vaidya, chief technology officer, Aftek Infosys, “Out of Yahoo’s total revenues, nearly $88 million comes from fees paid by over 5.8 million paying relationships using paid services. Looking at this performance, net income and cash position, making space available for 100 MB is no big deal. Secondly, not all accounts would really be using their full quotas. Most service providers today use intelligent, on-command allocation and utilisation of space resulting in reduced space requirements.”

Currently, users from India with yahoo.com IDs will benefit from the new offer, while e-mail subscribers having yahoo.co.in IDs will get a bigger mailbox only in September. That the space war triggered by Google is taking things to astronomical limits can be seen from the fact that even Microsoft’s Hotmail is upgrading its 2 MB mail box to 250 MB with the ability to send attachments of up to 10 MB. Also, unlike the company which started it all, none of the companies currently have any plans to insert text-based ads in their e-mail based on the contents of e-mail.

Will paying subscribers switch?

Since storage was one of the key factors for subscribers to consider the option of a paid e-mail account, will these announcements make paid customers shift to the free accounts? Most market players Express Computer spoke to did not believe this trend would take place.

Says Verma of Rediff, “The market for paid and free subscribers can be compared to the market for bottled branded water and simple water. Both forms are available, but many customers still prefer to buy bottled water.” Most market players believe that POP3 access, which is crucial for many companies, will make them choose the paid e-mail account. Additionally, the option of having a number of e-mail addresses with the flexibility to increase the number of e-mail IDs and even the storage space makes corporates prefer paid e-mail to free e-mail. Currently, Rediff has got customers such as Bajaj Auto, Johnson & Johnson, Nestle and Hero Honda using its paid e-mail services.

Most importantly, market players believe that the choice of an e-mail address with the company’s domain name is a crucial factor for corporates since it conveys the company’s brand name. For example, a company called Raj Exports would prefer an e-mail address such as ‘ceo@rajexports.com’ to ‘rajexports@rediffmail.com’. Most players also offer users the ability to send bulk e-mails within a particular user group in a targeted manner. While the percentage of paid users out of total users is less than five percent for most e-mail service providers, almost all major portals are hopeful of converting the free e-mail subscriber base in due course.

While every e-mail subscriber is unlikely to shop or use match-making services, the expectation of making a customer stay on for life with one e-mail address (and then hoping that he will start using these services) is making even Indian organisations such as Rediff rush to announce various initiatives. It will be interesting to see how the major portal players react once Gmail is officially launched. The next battle could be on features—with Gmail users already saying that the service is way ahead of that provided by others.

Gmail effect
Company	Storage Earlier	Storage Now	Paid Storage	Registered user base in India
Google (Gmail)	NA	1 GB	NA	Beta version on trial
Rediff (Rediffmail)	5 MB	1 GB	2 GB	25 million
Yahoo	4 MB and 6 MB	100 MB	2 GB	30 million
Microsoft (Hotmail)	2 MB	250 MB	2 GB	12 million (industry estimates)

What others offer
Company	Pricing	Features
Microsoft	$19.95 per year	Ability to send 20 MB attachments, virus protection
Yahoo	$19.99 per year	Virus cleaning, no graphical ads, no promotional taglines in messages, POP access
Rediff	Rs 1,499 per year	5 e-mail IDs, virus protection, no advertising, own domain name

srikanth@expresscomputeronline.com