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Hotmail delivers red-hot business

By Steven Vonder Haar, Inter@ctive Week Online
September 29, 1998 6:35 AM PT

Hotmail Corp. has more than doubled in size in the nine months since Microsoft Corp. bought the Web-based free e-mail service and now is nearing a pace for adding 1 million new accounts weekly.

Hotmail is emerging as a key engine for driving the kind of growth in Microsoft's online media business that the company had envisioned when it bought the e-mail service for nearly $400 million on Dec. 31, 1997.

Hotmail now has 23 million active accounts, compared with 10 million at the time of the Microsoft acquisition, said Microsoft Network Vice President Laura Jennings. The service averages 125,000 new accounts daily and, in the past month, has peaked at levels exceeding 150,000 accounts daily. At 125,000 accounts daily, Hotmail's weekly average of new accounts generated now stands at 875,000.

College students drive traffic
Recent spikes in Hotmail activity have been driven in part by the return of college students to college campuses where Internet services are broadly accessible. Also playing a key role was the company's move in July to integrate Hotmail services into its portal, Jennings said.

Even with the growth, Hotmail's usage and subscriber retention rates have remained relatively steady compared with levels at the time of the acquisition, Jennings said. Of all Hotmail subscribers, 20 percent log into the service daily, 35 percent weekly and 60 percent at least once a month, Jennings said.

The service purges accounts that have been inactive for four months. Jennings declined to disclose the rate at which accounts are being dropped but said it is consistent with levels recorded by Hotmail prior to the Microsoft acquisition.

Hotmail's growth rate is surprising given Microsoft's decision thus far to promote Hotmail only on Microsoft-owned sites, according to Mark Mooradian, an analyst at Jupiter Communications LLC.


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