March 1, 1999 12:20 PM PST
Free email comes at a price
Providers are promising a smoother ride in the future, but users' patience is wearing thin. As firms pour more resources into the services, observers are taking a closer look at the business of giving away email service and asking whether the giveaway isn't too popular for its own good.
Analysts and providers alike agree that free email has become a central pillar of the Web content and service aggregation model. Though it once was an add-on feature, no portal today worth its salt would be without a free email service; the same rule applies for portals that appeal to vertical markets such as teens, seniors, women, and the like.
Portals boast that their seven- and eight-figure membership rolls are driving traffic to their revenue-producing pages and advertisers. Some are licensing their technology, as Hotmail does to AltaVista, while others, like Netcenter, are planning to offer paid, premium services.
Free email services also are expected to increase brand awareness, with every piece of sent email circulating the brand name in the address bar. Perhaps the most prized aspect of free email is its "stickiness," or the degree to which the application keeps users coming back to the site on a regular basis.
Disgruntled users unlikely to leave
But as the services have grown, so have the problems that plague them, from outages to security holes. And when service falters, firms risk incurring more ire than loyalty.
"I don't recall having many problems in the beginning, but as of the last year, they are so many I've lost count," wrote Sharon Greenspan, a Hotmail user since 1995, in an email correspondence with CNET News.com.
"Sometimes mail takes hours to get to me," she wrote. "Sometimes I never get mail that people say they sent. I constantly have problems logging on. People have told me they get a message back saying that their message was undeliverable, when they have the right address. I've often gotten mail a week after people have sent it."
In addition to technical glitches, Greenspan and others complain that customer service is lacking. Customer service on the Web in general has been problematic, but free email services in particular are trying to leverage the growing role email is playing in mainstream Net users' everyday lives. Getting a reputation for lackluster service could thwart the free emailers' effort to become a daily part of Net users' lives.
"When you try to reach someone at Microsoft to make them aware of your problems, you cannot get a live person, and when you email them, you get template answers that don't give you the information you're looking for," Greenspan wrote. "In my opinion, this is no way to service your customers. I'm using it less and less now."
Greenspan's sentiments are confirmed in part by providers' acknowledgments that a recent upsurge in membership and overall usage has caused them to implement system upgrades, and that during those upgrades users may have encountered delays in accessing the services or receiving mail. Her concerns also are reflected in numerous complaints about a number of free email services, some received by CNET News.com and many posted to newsgroups such as "comp.mail.misc," "nz.comp," and "microsoft.public.msn.discussion."
Still, analysts point out that users aren't likely to abandon an email service they have used for a while. Part of the stickiness of email services is the difficulty of switching from one to another once friends, family, and associates have one's email address and a nonportable address book is filled with contacts.
"There are very high switching costs" for the user, noted Forrester Research analyst Chris Charron. "That forces users to put up with a certain level of bad service, kind of like the service from your local bank. Even when it sucks, which it does frequently, it's not worth changing your account."
For its part, Hotmail has blamed spotty service on unspecified "back-end issues." Frustrated users have gotten apology pages ascribing delays to upgrades or to "heavy traffic on the network."
Speculation is rife among users that Hotmail's service woes are the result of its efforts to port over to the Windows NT operating system. Hotmail, which Microsoft bought in December 1997, was built around Sun Microsystems' competing Solaris architecture.
Hotmail denied that the current service woes had anything to do with switching to NT. Microsoft said it was "committed to upgrading to NT" but declined to comment further.
In the face of what it termed "truly explosive demand," USA.net has had its share of service glitches recently. The service powers WebMail, a service of Netscape Communications' Netcenter portal, along with free mail for AmericanExpress.com and its own free email site. The firm has more than 8 million mailboxes under its management.
"We've had an enormous increase in usage over the last two months, and with the upsurge we have run into some capacity limitations," said Danny Winokur, vice president of business development for USA.net. "For the most part those problems have been resolved."
Some USA.net users had their incoming mail delayed, and some encountered slow response from site servers.
In order to avoid becoming a victim of its own success again, USA.net has moved to improve preparedness for future upswings in usage and membership.
"We have improved capacity planning processes, including a service that monitors all major components of the system and alerts operations staff to abnormalities," said Winokur. "We've also set up trigger points to intelligently react to increased trends before they exceed capacity restraints and have increased our margins of excess capacity. That gives us a longer runtime to react to a trend before consuming the margin of excess."
Mail.com, formerly iName, warned users they would be shut out of the service for up to 48 hours during a "major" upgrade one week ago. The upgrade wound up lasting 13 hours. The company powers free email for numerous Web sites, including Rollingstone.com, CNN/SI.com, Prodigy Internet on the Web, Pathfinder, AltaVista, and Snap.
Snap is a joint venture between NBC and CNET: The Computer Network, publisher of News.com.
"One of the risks of offering Web-based email is that you can offer a really great product, people flock to you, and you'll have scaling issues," said Mail.com vice president of operations Jason Gorevic. Mail.com's upgrade involved switching to a new database infrastructure. Service to Prodigy's Web site and Snap's Email.com site was not affected.
Mail.com, which manages about 5 million mailboxes, claims to lead the free email pack in the crucial customer service area. Gorevic said Mail.com responds to user email within an hour and 24 minutes; a recent Jupiter Communications study showed that only 38 percent of 125 surveyed sites responded to email or customer service complaints within one day. Twenty-three percent never responded at all.
What price bandwidth?
But beefing up capacity and customer service may not be cost-effective. The email services are acknowledged to be loss-leaders; moreover, it remains unclear how successful they are in getting users to spend money elsewhere on the portals. While Wall Street currently values portal firms based on subscriber rolls more than revenue, analysts predict it won't be long before investors start taking a closer look at whether those millions of users are spending money or merely costing the portals more money than they are worth.
"It can be tough to convert usage into revenue-producing page views," said Forrester's Charron. "The ability to generate ad revenue in email is limited just the way it is with chat and other communications tools where users are interested in utility, in getting something done, and are less apt to click on ads.
"Thirty million users is impressive, but it can be difficult to parlay that number into cash," he added.
None of the sites would offer any revenue-related data, but all claimed that free email was bringing home the bacon.
"Email is a core service of any portal," said Amy Lesnick, senior product manager for Netcenter's WebMail. "WebMail drives a lot of our registrations and keeps users coming back. They're definitely using our other services, and WebMail has been very successful in driving revenue."
Soon-to-be-released WebMail 2.0 will offer premium services that users will have to pay for, including virus scanning, pager notification, and email forwarding.
Meanwhile, users apparently have to live with the glitches that seem inherent in many of the free services.
"As a free service it's a little different than a pay service like the phone company," said Yahoo Mail producer Lisa Pollock. Yahoo Mail has received its share of criticism from users, but Pollock said the service hadn't undergone any particularly acute service problems recently.