On April 1, Google, Inc. announced a new Webmail service that will provide each subscriber with a free 1 gigabyte mailbox. The new service, called Gmail, raises the bar for free e-mail space by a stunning factor: 100 times the space that Hotmail and Yahoo! provide. Gmail will include advertisements targeted to the content of subscribers' mail. Google's announcement shook the Webmail industry. A whimsical press release and the announcement's April 1 timing also generated massive doubts as to its authenticity. Privacy advocates also raised concerns about the targeted ads.
The Gmail tagline is, "Search, don't sort." Google says: "Gmail uses Google search technology to find messages so users don't have to create folders and file their individual e-mails." A Webmail service offering a gigabyte of storage could let you keep years of important e-mails in one place. Combine that with the power of Google searches, and you've finally got an efficient way to find that important contract negotiation from 3 years ago. Millions might flock to such a service—if it's real.
The Media Is Skeptical
Google released news of the service to the media on March 31. John Markoff covered the story for the April 1 edition of The New York Times, and many media outlets began carrying the story overnight.
As news of Google's stunning announcement spread on April 1, many in the media and the public assumed those playful lads in Mountain View were enjoying another April Fool's Day. Internet discussion boards were abuzz with speculation. Google co-founders Larry Page and Sergey Brin wisecracked in the press release, claiming they launched Gmail to help out a single individual who'd complained that managing e-mail is chaotic.
Reporter Mike Musgrove covered the story for The Washington Post, and he describes how Google's April 1 shenanigans caused problems:
My editor and I looked at the loopy way the press release was written and figured it was likely a joke, considering the date, and considering that Google seems to like to have a sort of playful corporate image. When I talked to Google this morning, half of my time was wasted by asking for their reassurances that this was not, in fact, a joke. And I went through this again, in reverse, with sources for the story who weren't sure this was for real or not.
The BBC scolded Google. Under a headline, "Timing makes Google an April Fool," and a subhead of, "The first rule of public relations: check the calendar before your big product launch," the BBC wrote: "Google's insistence that Gmail was genuine was undermined by the oddly jokey style of its initial announcement." They quoted Google's vice president of products, Jonathan Rosenberg: "It is April Fool's Day. We were having fun with this announcement....We are very serious about Gmail."
New Webmail Economics
Brewster Kahle is founder of the Internet Archive, which houses hundreds of terabytes of Web history. (A terabyte is 1000 gigabytes.) I asked Kahle about the marginal cost of one gigabyte of disk. Kahle replied: "We pay $1.30 per gigabyte for spinning storage, and then back that up with a mirror. This makes $2.60 per gigabyte." Kahle notes that those figures assume capital costs, noting that the hardware should last 3 to 5 years. He observes that power and system administration also factor in, but with extremely large data farms, those costs are relatively insignificant.
Tech visionary George Gilder told me: "Google is exploiting the key abundances of the era: bandwidth and storage, summed up in my model as ‘Storewidth,' in order to supply what is scarce: Just-in-time information. Google is the prime Storewidth company." Gilder calculates the cost of storage at about $2.33 per gigabyte per year, including depreciation and maintenance. But he thinks Google enjoys other advantages:
Since Google must sustain these costs anyway to support its search capacity, advertising model, and news services, I believe that their marginal cost for supplying e-mail is close to zero when the increasing volume of usage of all services is considered. Market share and volume are everything in these front loaded Internet services. With more numbers and better targeted advertising, Google will make out like bandits, without the downside of encountering Wyatt Earp at the FTC corral.
Many analysts see the Gmail announcement as a challenge to Hotmail and Yahoo! mail. Certainly those two leading Webmail providers must choose whether to match Google's new threshold. Perhaps they can afford to; Hotmail has the deep pockets of Microsoft behind it, and Yahoo! remains a formidable competitor.
The Gmail announcement may have more immediate effect on companies like USA.net, which markets Webmail services to enterprises and individuals under the Netaddress brand. Ironically, on March 31, as Google was about to announce Gmail, Netaddress offered subscribers a special deal: 10 megabytes of storage at $30 per year.
Even though Google is new to the Webmail business, its position is strong. It builds its Webmail service on the dawn of an IPO expected to raise $20 to $25 billion dollars. Just as Google is drawing advertising revenues from competitors in Web space, its targeted e-mail advertising program could bring in substantial revenues. Google can afford to serve millions of new customers as it builds its revenues and it has the scale and skills to manage massive amounts of data across data centers worldwide.
For the short term, companies such as USA.net and Criticalpath.net may take solace in their hosted e-mail services, which allow smaller companies to outsource management of corporate e-mail. Fortune 500 companies are unlikely to entrust enterprise e-mail to an externally hosted service.
Terabytes of Personal Data on Google's Server Farms
Gmail could attract millions of subscribers. The notion gives some people pause. The result could be the largest migration of personal information in history. Karen Coyle, a digital library specialist (http://www.kcoyle.net), remarked: "Doesn't this have the potential of being one of the greatest risks to personal privacy in recent history? Although I realize that there are backups and such, my ISP does not store my e-mail on a permanent basis, and as far as I know there is no online access to my mail history. And other Web mail providers have disk space limits that encourage you to download or delete the mail. If your mail is stored at Google, and you have an incentive to keep it all because you've got the 1 gig and the great search capability..."
Perhaps Google is crazy like a fox. After all, every article that questioned the announcement probably led to a follow-up story confirming its veracity. In one day, Google generated tremendous buzz for Gmail—a service whose launch date we still don't know. At this point, a handful of users are testing a preview version of the service. For more information, see http://gmail.google.com.
Do not doubt Google's ability to promote its new service in other ways. Do a Google search for "Webmail"—the first sponsored link is an ad for Gmail.