Hotmail offering premium service

Joining a trend to charge users for extra features, Hotmail will offer digital greeting cards from Greet Street. The price: 50 cents each.

Hotmail's deal with Greet Street falls in line with revenue strategies at other Web-based email providers. Free email service Bigfoot, for example, announced last month that email virus protection from McAfee Associates would be available to users for $29.95 per year. And in June Bigfoot began offering premium options for spam filtering, an auto-reminder that alerts the user on important dates, and an auto-responder that replies to mail when the user is inactive.

Analysts say the trend among free email providers toward pay services is both unsurprising and perhaps inevitable.

"There's a finite number of sites that will be able to be profitable with advertising as an exclusive source of revenue," said Ross Rubin of Jupiter Communications. "These services have been losing a lot of money, even though they've attracted a large number of users. Advertising has not been able to do it for them. It makes sense that they're adding value-added services."

But Hotmail is not exactly following the crowd with its digital greeting cards, said Rubin. Most companies have tried to offer value-added features that would make the service a universal communications manager, fielding and organizing voice mail, fax, and email with extensive rules and filters. As far as greeting cards go, "There's no proven revenue model there," said Rubin.

Even with pay services, companies that exclusively offer free email may have to reevaluate their product line. Mail services offered by Geocities, Excite, and WhoWhere might prove to be the winners in the free email game because email constitutes a minor part of those companies' revenue stream.

"Strict email providers understand they'll have to expand their services," said Rubin.

Other competitors in the crowded field include NetAddress, RocketMail, and Juno.