December 1, 1998 3:05 PM PST

Hotmail membership swells to 30 million

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Microsoft said today that its free email service Hotmail has more than 30 million active accounts, a number that puts it well ahead of its competition.

The company said Hotmail added two-thirds of those members since the start of this year, when Microsoft bought the free email company.

In addition, Microsoft said it is upgrading Hotmail so that the service can handle twice as many accounts as it does currently.

Still, Hotmail faces intense competition in the free email space.

The release of the new subscriber numbers comes just a week after two of Microsoft's archrivals on the Internet--America Online and Netscape Communications--joined forces, with AOL announcing plans to acquire Netscape.

Hotmail, as part of Microsoft's MSN network of sites, is a key component to the company's Web strategy. Not only does Microsoft receive money from companies that advertise within each piece of email, it also generates revenue more indirectly by sending Hotmail users to other Microsoft sites, which also sell ads and offer e-commerce.

In a statement today, Hotmail stressed that it has more than double AOL's 14 million members, although making such comparisons is difficult given the inherent differences between the two services.

Also, the tabulating of membership figures has become a crucial and controversial debate for advertisers.

Hotmail counts as an active member anyone who has used his or her account during the past 120 days, said Laura Norman, product manager for MSN Hotmail. Of the 30 million accounts counted, 15 million log on once a month or more. Of those 15 million, 6 million are logging on at least once a day.

AOL, on the other hand, considers anyone who simply pays his or her monthly bill a member. But those members may not log onto the network long enough to look at all--or any--of the ads. Also figuring into AOL's calculations is "churn," the rate at which old members drop their subscriptions and new ones sign up. AOL said its churn rate has declined, but it does not publicly release those figures.

Advertisers are drawn to AOL because the online giant provides an all-in-one Internet stop for many users, including email and shopping offerings.

Hotmail uses a variety of operating systems, including Microsoft's Windows NT as well as Unix. In May, former Hotmail CEO and current Microsoft executive Sabeer Bhatia said Microsoft had plans to switch over exclusively to NT.

Norman said that while the company has not yet made that switch, it still plans to do so. "We'll be migrating to Windows NT servers over time."

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