Monday, March 28, 2005

YHOO vs GOOG email war

The Internet Stock Blog: Five implications of the YHOO vs GOOG email war

"Yahoo is less reliant on Internet ads than Google as it has diversified revenue streams, including premium services. But who's going to pay for "premium web email" when Yahoo will be constantly forced to improve its free service due to competition with Google? Looks like advertising and stickiness are Yahoo's future rather than paid services"

Well said. I have always maintained that its difficult to offer premium services when the competing free offering is 'Good Enough' Until gmail came along, we were required to subscribe to the premium email, for getting 1 GB of storage.

For example if I look at the premium service for individuals provided by, I get the following -

"For less than 14 cents per day, Net@ddress offers you a host of business-class messaging features that are easy to use, reliable and available to you at a low cost."
"100MB storage standard, with the option to increase to 250MB and 500MB"

Now I wonder how many individual users would sign up for this service.

I first had a discussion on free versus paid email services for individuals when went paid in 2001. The argument at that time was that free servies will be soon over and service providers would all shift to a subscription based business model.
Here is the announcement -
"'In today's changing business environment, revenue sources are no longer adequate to support our Net@ddress free email service. The current Net@ddress free email service will be discontinued on July 31, 2001. To keep your current Net@ddress email account, subscribe for a new Net@ddress Messaging Center account today.'"

My 'last man standing' analogy - Imagin that there are just 5 free email providers. The advertising revenue is not enough to sustian them all. One provider stops offering the free service and goes for the subscription model by offering only premium services. Some of its current users who do not require the premium services migrate to the other free providers. This cycle continues a couple of times and in the end there are only 1 or 2 free providers left. With other users migrating to these free services the advertisment based model can now be sustained. Hence the free model will always be there for the 'last man standing'.


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