Editor’s note: Contributor Ashkan Karbasfrooshan is the founder and CEO of WatchMojo.

Back in November 2006, I published the Top 10 Greatest Internet Digital Media M&A Deals of All Time.  It included eBay’s $1.5 billion acquisition of PayPal, Yahoo’s $1.6 billion acquisition of Overture, and Microsoft’s $400 million purchase of Hotmail back in 1998.  It also included News Corp’s $580 million acquisition of MySpace.  Don’t laugh.   The list was published a month after the big $900 million deal with Google, which I thought Google had drastically overpaid for at the time.  Of course, times they change, as does the list, so I decided to update the list – and yes, I went through all 255 pages on the Acquisitions section of CrunchBase.

Below is my updated list of the Top 10 Greatest Digital Media M&A Deals, in reverse order.  Give me your top ten in comments.

The Criteria

• Lists are subjective, this one isn’t any different.
• Suffice to say these are U.S. deals.
• This is not a “tech list”, my background and experience lies in search, video and online advertising, so naturally there is a skew there.
• Expensive is relative, but not overpaying is a major criteria.  As Fred Wilson mentioned when I first published the initial list, “Seven of the eleven deals were done in the “Internet doldrums” of 2001-2004. It will always be true that the best time to buy is when nobody else is buying.”
• People matter in all deals, so a good “acq-hire” is sometimes worth more than a deal that is accretive to earnings.
• Take out a competition?  Always good!
• Buy low, sell high?  We’re impressed.
• Allows parent / acquirer to enter a whole new market with one deal?  You have our attention.
• We are excluding acquisitions by private equity firms, otherwise Hellman & Friedman’s acquisition of Doubleclick for $1.1 billion before selling it to Google for $3.1 billion would rank near the top.
• As with the original list, we’re avoiding partial acquisitions.  That is why Google’s 5% investment in AOL for $1B would didn’t make the initial list (it was a very smart defensive move) and why Silver Lake and Andreessen Horowitz’s 70% acquisition of Skype didn’t make the cut on this updated list (that could have been #1, seeing how they flipped it to Microsoft for $8 billion within 2 years).  Microsoft’s 1.6% stake in Facebook also seems like a bargain now.
• They have to matter in 2011: for example, while AOL’s acquisition of ICQ to defend AIM and bolster its instant messaging platform was wise, today AIM holds a 1% market share, so the deal doesn’t really resonate anymore.
•  Last but not least: like with all lists, I am sure I am forgetting a big one, so chime away.

10.  Microsoft acquires Hotmail for $400 million in 1998

The previous year Yahoo! had acquired Four11 for $92 million, by countering with a $400 million acquisition for Hotmail, Microsoft bought its way into the first truly viral application: email. Not only did Hotmail users lead one another to sign up, but as users signed out of their email, they were redirected to MSN.com.

Ironically, this deal has made both “Greatest” and “Worst” lists.  But even as of today, Hotmail is the largest web-based email service and remains larger than AOL, Yahoo and darling Gmail. (How many accounts are active is a fair follow-up question).

More on this deal here.

9.  AOL Time Warner acquires Advertising.com for $435 million in June 2004

Despite wiping out nearly $100 billion in market value by way of the disastrous AOL and Time Warner merger, AOL convinced the board to acquire Advertising.com in 2004 for $435 million.  Without a doubt Advertising.com isn’t driving AOL’s revenues the way it once did, but were it not for this deal, AOL would be in much worse shape than it is today.

More on the deal here.
8. Amazon Acquires Zappos for approximately $928 million in July 2009

Were it not for the RIP Good Times presentation that Sequoia gave its portfolio company CEOs in late 2008, it’s entirely possible that Zappos would still be independent.  But the fact remains, Jeff Bezos met his match in Zappos’ CEO Tony Hsieh on the customer satisfaction front.  By scooping up Zappos, Amazon basically acquired the lone threat in the e-commerce landscape.

7. CBS Acquires CNET for $1.8 billion in May 2008
Yes, CBS paid a lot, but at 4x revenues in early 2008, it didn’t have much choice; CNET represented the only property/company that could give CBS overnight scale: becoming a Top 10 property.  And sure, had CBS waited a few months, it could have paid half.  But that’s hindsight, and this is M&A.  I laid out the logic of this deal a couple of months before it closed.  Also (disclosure), my company could have been part of this entity as we had strategic conversations with both CBS and CNET before they hooked up.

6. Google Acquires Doubleclick for $3.1 billion in April 2007

Yes, $3.1 billion is a very expensive price tag—especially considering private equity firm Hellman & Friedman paid $1.1 billion earlier—but Doubleclick has helped Google become a display banner juggernaut.  It was money well-spent.

5.  Google Acquires Applied Semantics for $102 million in April 2003

In my original list, I had chosen Google’s acquisition of Sprinks in October 2003 because overnight this deal gave Google a lot of real estate on third-party websites to serve its text link ads on.  However, it was the Applied Semantics deal that gave Google the technology to scan web pages and serve contextual ads, thus giving birth to AdSense.

4. Yahoo! acquires Overture for $1.63 billion in July 2003

After Yahoo! acquired Inktomi for $235 million in December 2002, CEO Terry Semel pulled the trigger on Overture (formerly GoTo.com).  The deal not only gave Yahoo! an inroad into the rapidly growing paid search business but served as its lifeline to stay in the black.

More on the deal here.

3. eBay acquires Paypal for $1.5 billion in 2002

eBay dropped its Billpoint product and agreed to acquire Paypal for $1.5 billion.  Considering that about 60% of PayPal’s business came from eBay, you have to wonder why eBay didn’t apply some pressure to bring down the price, but the fact remains: PayPal drove eBay’s revenues and is now clearly the most exciting part of the business.  The deal also gave rise to a whole generation of Internet entrepreneurs and investors who went onto found or invest in companies such as Facebook, LinkedIn, and Yelp.

More on the deal here.

2. Google Acquires Android for $50 million in August 2005

Google’s own M&A team credits Android as their best deal ever: David Lawee, told attendees at the Stanford Accel Symposium that the acquisition was quite simply Google’s “best deal ever.”  Android only cost Google around $50 million, and considering that Android founder Andy Rubin, who previously started mobile-device maker Danger Inc., stuck around to take on RIM and Apple, it clearly deserves a top spot.

1. Google Acquires YouTube for $1.65 billion in October 2006

David Lawee might be reading this and scratching his head: what can possibly convince someone to pick YouTube ahead of the deal that Google’s own M&A team picked as the “best deal ever”?

Google bought YouTube for $1.65 billion in stock and within the first few days saw its market valuation rise by well over $2 billion.  By doing so, it inadvertently blocked its only true threat as a search engine by scooping up what was to become the No. 2 search engine in the world.  It can be argued that  every 1% search market share is worth $1 billion.

If that wasn’t enough as a defensive move, YouTube gave Google an entry into display advertising (this was six months before the Doubleclick acquisition) and billions of additional pageviews to serve Google search ads on as overlay on the videos.  Today, Google is the undisputed king of both search and video, and thanks to Android, it can claim to lead in mobile as well.

But this misses the point, were it not Android, it could be argued that Google would have found something else (internal or via acquisition) to do what Android does.  Google made Android into what it is today.  However, YouTube was a force to be reckoned with and at the time of the acquisition the most explosive startup ever.  Sequoia had only poured $11.5 million of venture funding into the company.  YouTube had the runway—forget what Mark Cuban says, he did after all sell Broadcast.com for $5.7 billion to Yahoo—to become a threat the way Facebook has become a threat.  By buying YouTube, Google scorched the earth in online video.

It’s YouTube’s world, we just stream it.

Hope you enjoyed this week’s article.  Suggest topic ideas for upcoming weeks. 

Image credit: Shutterstock/ Ilona Baha

Microsoft’s newly announced Hotmail for Android application is available now in the Android Market. The app, which aims to serve the world’s largest webmail platform, offers a handful of standard features including push email, synced calendar and contacts, support for multiple accounts and more.

There’s nothing too remarkable about the app itself, which also lists par-for-the-course abilities like the ability to send attachments (No? In an email app?!), the ability to send pictures, and access to folders and subfolders.

More interesting, perhaps, is the related news that Hotmail will finally become available as a selectable account option in the “Mail” settings area on iOS 5 (iPhone, iPod Touch, and iPad). Currently, Microsoft’s only presence here is the “Microsoft Exchange” option. While it is possible to set up access to Hotmail using that option, it’s not as straightforward, and, for obvious reasons, many consumers probably don’t even realize that their iPhone supports Hotmail.

Hotmail’s first iteration of Active Views involves linked content — Dharmesh Mehta, director of Windows Live, says that 90% of email contains a link to an external service like YouTube, Flickr, or LinkedIn. So when Hotmail sees that there’s a link to a YouTube video, it will automatically embed the video so that you don’t have to actually follow the link (Hotmail isn’t the only service to do this). Mehta says that this has been very effective — while only 10% of users click on a normal link to a video, 25% will click on an embedded version.

Hotmail’s more unique feature, and the one related to today’s announcement, is the second type of Active View, which launched in December. Microsoft has allowed a handful of select partners to offer dynamically updating emails, which will always present fresh content, even if the recipient doesn’t open it for days or weeks after receiving it.

The feature first launched with a handful of partners including Netflix, Orbitz, and LinkedIn, and today’s launch includes LivingSocial and Posterous. Posterous CEO Sachin Agarwal showed me a demo of their integration, and it was pretty slick: every time someone submits a new post to Posterous, that post gets distributed via email to their subscribers. Before now that email would omit comments — you’d have to click through the post to see if there was any discussion. But using Active Views, Posterous can display the most current comment threads as soon as you open the email, and you can even submit a comment directly from your inbox.

As for the earlier integrations with Orbitz and LinkedIn, Mehta says that partners are learning that it’s best not to simply try to recreate their websites in the inbox, but to rather hone in on the functions people will be most likely to want. In other words, they’re still figuring out what works.

Of course, these dynamically updating emails are still only available to select partners, which was one of my original critiques of the product. Mehta says this is for security reasons (each partner is vetted, has to be white-listed, etc), but says that ultimately he hopes that Active Views will be integrated into other email providers, and that it will be available more broadly to senders.

Aliases aren’t anything new for webmail services. Hardcore Gmail users are probably familiar with the old ‘+’ trick: if your email is jason@gmail.com, you can use a + symbol to create a variety of aliases that all go to the same place. For example, you might create jason+receipts@gmail.com, jason+deals@gmail.com, and so on — each with a different filter to route the emails to different labels (or deletes them immediately). It’s not perfect, but it works decently well.

Hotmail has offered the same ‘+’ feature too, but this new alias option is more powerful. One issue with Gmail’s solution is that it’s trivial to bypass — I might enter jason+spam@gmail.com as my address on a site I don’t care about, but they can easily strip out that “+spam” and bypass any filters I’ve set up.

With this Hotmail feature, you set up an entirely different email address. Hotmail is also intelligent about when to use each address — by default you’ll reply to messages using the address they were sent to. And you can swap between multiple addresses when you go to send an outbound message.

Yes, you can accomplish similar things using multiple Gmail accounts and their ‘Send As’ setting, but this is a very nice option from the Hotmail team.

*Those aren’t my actual email addresses. Swear.

Today, Hotmail is launching a new feature as part of its Active View platform that looks to fix this. The email provider has teamed with a handful of select parters to provide rich, dynamic emails that will update when you open them, and allow you to interact with services directly from your inbox. In other words, they’re making email a lot more like real websites.

For starters, Hotmail will be offering this enhanced email from four providers: Orbitz, Monster, Netflix, and LinkedIn. Orbitz’s messages will display current travel deals (instead of stale ones that you may have missed), and will also let you search for flights directly from your inbox. Netflix will give you recommendations based on what it has in stock at the time you open the message. LinkedIn will let you approve new work connections from your inbox, and so on.

Dharmesh Mehta, director of product management for Windows Live, says that the feature will be rolling out over the coming weeks for the services mentioned above, and that more services will be added early next year. From a technology standpoint, the platform has a few security systems in place to ensure that these rich emails are only coming from trusted parties.

The first safeguard is that this system isn’t open to all inbound messages — only trusted services will be allowed to send them. And Microsoft is using OAuth to allow users to directly connect their inboxes to the third parties services they’re interacting with from their inbox.

Mehta says that Hotmail will be approaching the other major email providers to talk about turning this into an industry standard, given that it doesn’t really make sense for services like LinkedIn to have to build multiple versions of their ‘dynamic’ emails.

It sounds like a cool system that could save time, but I’m not a big fan of the fact that only ‘trusted’ providers will be able to enable this functionality. Sure, it makes sense to help safeguard users against spam, but I can’t help but think that startups looking to get their services in the hands of users will be at a severe disadvantage if their big-name competitor is allowed to offer Active Views, and they aren’t. Hopefully Microsoft plans to open up this system more broadly down the line.

Dear Microsoft,

Remember me? I’m that guy at TechCrunch who actually defends you and your products, when appropriate, and whenever people start talking that crazy talk about you.

I would like to genuinely thank you for your part in making Web-based email popular with Hotmail – now called Windows Live Hotmail I see – and all. My wife still proudly hands out her @hotmail.com address whenever someone asks her how she can be reached, even though she is known to occasionally use Facebook and Skype. And yes, I still think she rocks.

I was planning to dive into her Hotmail account to answer some messages on her behalf earlier. She asks me that from time to time, and who am I to refuse to help her out once and a while, since I spend so much time on my (Windows 7) PC anyway. Least I could do, right?

Your Hotmail service is currently down for maintenance, I notice, just like some people are experiencing problems with Gmail today. Yes, right when both Facebook and AOL are launching their takes on modern digital messaging no less. It happens, no biggie.

I totally dig that you’re apparently improving your (free) service, even though I know it’s probably a little white lie and you’re actually experiencing problems over there. I accept your apologies for getting in my way, too, and I will try again in a few minutes, no problemo.

But seriously, can you please NOT ASK ME to get in touch with you if Hotmail happens to be down for me longer than an hour (and then actually ask me to wait for 4 hours before voicing my complaints via some online message board)?

How about this: you just keep improving your service and/or fixing the anomalies that prevent you from offering your online service, so I don’t need to get in touch with you in 1, 2, 3, or 4 hours to tell you about it. I’m assuming you know when your service isn’t working, or at least not for everyone, and that it’s in your best interest to get things back up and running as soon as you possibly can, not just because your users beg you to.

Don’t even bother responding to this post immediately, dear Microsoft, and keep doing whatever you’re doing to fix Hotmail instead. I’ve been trying for more than an hour now, and I still can’t connect, so this is just me telling you me and my wife are still waiting.

This morning, Microsoft showcased this new version of Hotmail to a room full of press at its offices in San Francisco. It’s fast, slick, and comes with a set of new features for managing large amounts of email that make it a much better rival to Gmail. Does it look like a revolution? Not really. But it does incorporate some very nice features — things that seem quite obvious once you seem them in action, but aren’t already available elsewhere. And more importantly, they’re features that regular people will actually use.

First, the stuff that Hotmail is really just playing catchup with. The first thing you’ll notice is that threaded conversations are now offered, and it looks like they’re the default (though you can turn them off). The search box now features auto complete. You can flag messages (I can’t believe this wasn’t available before). There’s better spam protection. Gmail users should stop yawning, because there’s plenty of other good stuff.

Perhaps the most important suite of features, at least to people who commonly experience inbox overload, are all the new filtering and message management tools the new Hotmail comes with. My favorite is called ‘Sweep’. If you’ve subscribed to a newsletter but decide you don’t want to filling up your inbox any more, you can hit activate this option to move every message you receive from that sender to a folder other than your main inbox. Other webmail clients can do this too, but the flow for this looks easier than, say, making a filter in Gmail.

Another feature, called Hotmail Highlights, breaks out your messages according to where they’re coming from. One section shows you at a glance whether you’ve received any messages from people in your address book. Another shows you any messages you have from social networks like Facebook. On the left hand side of the screen, you’ll see a few options under the label “Quick View”. One of these is for photos — click it, and you’ll see all the messages in your inbox that have either image attachments or links to photo albums on sites like Flickr. There’s a similar option for Documents, as well as one that lets you immediately find shipping updates.

The other big features involve reading and composing messages. When you receive a message that has either photo attachments or links to an online photo album, Hotmail will use those photos to build a slick slideshow (it uses Silverlight). The service is even better for sending photos. Most email services aren’t great for sending photos, because they have a limit of 10-20 megabytes per message (and you also have to worry about whether the recipient’s service will allow for messages that large). Hotmail works around this by automatically uploading your images to Microsoft’s cloud storage service SkyDrive, which is free up to 25 GB. The resulting message looks great — Hotmail builds a photo album that should be visible in any mail client that supports rich formatting, and it doesn’t kill anyone’s inbox storage.

Finally there’s Hotmail’s integration with Microsoft’s online version of Office. When you receive a document in Hotmail, you have the option to view and edit it using the online versions of Office, and then save and send any changes back to the original sender. These online apps have strong integration with the desktop versions of Office 2010, but you don’t need the desktop apps in order to use the online versions for free. This is of course Microsoft’s answer to Google Docs, which is itself integrated into Gmail, and it looks well done (I expect document fidelity will be better for Microsoft, which may be a big sticking point).

I should point out that Yahoo Mail offers some of these features already (like the ability to break out messages that were sent by your contacts). And while Gmail doesn’t offer some of these features as part of its default set, you can reproduce some of them using filters. Hotmail doesn’t necessarily need to outdo its competitors in every respect — it’s still the largest email provider worldwide, with 360 million active accounts. But Gmail is growing fastest, and Microsoft is looking to curb that growth.  This new launch probably  isn’t going to spark any kind of mass migration away from Google’s services, it may well draw a few more former AOL users who are now looking for a new webmail provider.

Microsoft expects to ship the new Hotmail in mid-summer.

With Bing stealing the online spotlight at Microsoft recently, Windows Live has been collecting dust in a corner. But Microsoft is preparing to update the core services that make up Windows Live over the next few months, and is refocusing what used to be a hodgepodge of different online services into three main products: Hotmail, Messenger, and Windows Essentials (which includes photo-organizing and movie-making apps). Microsoft’s VP of Windows Live Chris Jones explains: “Anything about information discovery, retrieval, and the public web is Bing. Anything about personal information is Windows Live.”

The focus will not be to recreate people’s social networks or where they share photos, videos, or status updates, but rather simply to connect Windows IM and email products to the rest of the social Web. Although Hotmail boasts 350 million active users worldwide and Messenger has 320 million, both products are a bit long in the tooth.

You can expect Messenger to tap into social networks and mobile devices in a more unified way, so that you can manage your most important relationships from within IM. I asked Jones if he plans on adopting a lifestream approach like AOL has already done with AIM—one place where you can see both your private and public messages across IM, Twitter, Facebook and other streams. “We have a different approach,” says Jones. “People don’t want to merge their feeds.” Instead, Windows Live Messenger will add features to extract “the information most relevant to me.”

What that means is that Messenger will try to filter out the noise and show you public messages from only your most important contacts. Or perhaps those messages which are being amplified the most across the Web. All of these features are still being worked on.

With Hotmail, similarly Microsoft will add more features to help filter out the noise and highlight the most important emails from your most important contacts. (Again, Jones isn’t offering any specific details yet about how this will be implemented). Hotmail will also add more collaboration features to more easily share Office documents and photos.

Finally, with the rollout of Windows 7, Windows Live Essentials will become a way to extend their PCs to the Web, especially when it comes to sharing photos and videos. There will be a big mobile component to all of this too, as the Microsoft Mesh team adds syncing capabilities to these products across devices.

“Busy people don’t want another social network, what they want is the convenience of aggregation. We’ve done that. Hotmail customers have benefitted from Microsoft working with Flickr, Facebook, Twitter and 75 other partners since 2008.” – Microsoft statement on Google Buzz.

When one of the big guys launches a new product, competitors generally just sit it out and let the press do its thing. But Microsoft made a point of reaching out today with the quote above, criticizing Google Buzz as “another social network” and noting that Hotmail has aggregated Flickr, Facebook, Twitter and other services since 2008.

Of course Microsoft also owns a chunk of, and has a search deal with, Facebook. So they’re being threatened on a number of fronts. Still, just the fact that Microsoft is speaking on the record about Buzz shows that the guys in Redmond are a little worried. And they are not the only ones.

Many of the most successful Web 2.0 companies, including MySpace, YouTube, eBay, Flickr and rising stars like Twitter are prime examples of a “viral loop”—to use it, you have to spread it. The result: Never before has there been the potential to create wealth this fast, on this scale, and starting with so little.

In Viral Loop, Penenberg tells the fascinating story of the entrepreneurs who first harnessed the unprecedented potential of viral loops to create the successful online businesses—some worth billions of dollars—that we have all grown to rely on. The trick is that they created something people really want, so much so that their customers happily spread the word about their product for them.
One such business was Hotmail. After their 20th venture capitalist meeting, Sabeer Bhatia and Jack Smith, former hardware engineers at Apple who first came up with the idea for webmail, finally raised seed money from famed VC firm, Draper Fisher Jurvetson.

PS: I Love You. Get Your Free Email at Hotmail

After the two sides worked out terms governing the initial $300,000 seed investment, Sabeer Bhatia and Jack Smith walked out of the Draper Fisher Jurvetson offices with a $50,000 bridge check and quit their day jobs. Working from home, Smith, after bringing onboard another engineer, got down to building a prototype. They also needed to come up with a name, which fell to Smith, who stayed up late with his wife to brainstorm. Sitting with a blank sheet of paper they listed possibilities that contained “mail” in some form. Out of two-dozen there was Cool Mail, Run Mail, this mail, that mail, but no “A-ha!” moment. Finally his wife suggested, “Hotmail.”

Smith wrote it down. He wasn’t sure about the “hot” part, but given everything else this seemed the best candidate. Then he noticed it contained the letters “HTML,” the acronym for “HyperText Markup Language,” the lingua franca of web pages. Smith canvassed Bhatia the next day while riding in an elevator to their attorney’s office. As usual, his friend initially gave it a cool reception but they were running out of time so he went along with it. On March 27, 1996 Smith registered the Hotmail domain.

At the same time he finished a prototype within two weeks, sharing it with a small circle of friends who provided valuable feedback, mostly relating to layout, how e-mail should be viewed and the index page arranged, the look and feel of the interface, how the columns should appear on the screen. Smith demonstrated it at the next meeting with Draper and Jurvetson, who were duly impressed.

Draper asked, “How are you going to get the word out there?”

“We’ll put it up on billboards,” Bhatia said. He also mentioned radio advertising.

“God,” Draper replied, ” that’s expensive marketing and we’re giving this away?” He thought for a moment. “Can’t you just give it out to all those guys on the web?”

That would be spamming, Smith replied.

I guess spamming is bad, Draper thought. He hadn’t heard the term before. Then he flashed back to Harvard Business School, where he had received his MBA—a case study his professor had covered in class: women holding parties for their friends then selling to each other. A certain percentage of the women at each party became salespeople by referring more business. Tupperware, that was it. He also recalled MCI’s “Friends & Family Plan,” which harnessed the power of social interactions to spread the product. He wondered if they could do something like that with webmail.

“Jack,” Draper asked, “could you put a message at the bottom of everybody’s screen.”

“Oh come on, we don’t want to do that!” Bhatia blurted out.

“But can you technically do it?” Draper asked.

“Of course we can technically do it,” Smith said.

“Oh, great,” Draper said. “And it can persist, right? You can put it on one message and if he sends an email to somebody else you can put it on that one, too, right?”

“Yeah, yeah,” Smith said, not convinced.

“So put ‘PS: I love you. Get your free e-mail at Hotmail’ at the bottom.”

Bhatia and Smith communicated through pained expressions. “Oh, no,” they seemed to be saying. Draper had seen that look before. Of all the investors in the world, why did we end up with this idiot? Frankly, he didn’t care what they thought. This just felt right.

“Wait a second guys, don’t you get it?” Draper asked. A tag line at the bottom of each message would act as free advertising. “I can send you an e-mail and you can send it to all your friends and they get it and they can sign up and send it to their friends and pretty soon it takes off.”

Smith said, “I don’t think…”

Bhatia interrupted. “Let’s move on to other business.”

Draper agreed to table the discussion for now, but had no intention of letting it go. He vowed he would keep pounding until they listened.

They launched HoTMaiL on Independence Day 1996. Not only did they like the symbolism—they viewed webmail as a populist tool because any user could log in from anywhere in the world—Smith had long promised the service would be ready by then. After turning on the registration function and hitting the switch in the early afternoon, Smith accompanied his tiny technical staff to Chili’s Grill & Bar in San Jose to celebrate. To keep track of signups he brought along a laptop with an attached radio modem receiver on the back, the antennae sticking up like a divining rod. Over quesadillas Smith counted 100 registrations in the first hour. After lunch they went to the movies, and by the time the summer blockbuster “Independence Day” began to roll he tallied 200 signups. Upon exiting the cinema, Smith logged in again to find that fifty more joined HoTMaiL. They were finding the site via word of mouth and word of mouse. People were talking about it, and letting their friends and family in on the deal via email, using the Hotmail message as a proof of concept: Eighty-percent of those who signed up said that they learned about it from a friend.

Growth was robust but not staggering for the week. At the next meeting at DFJ Tim Draper once again pushed the two young entrepreneurs to insert a tagline into each message. Bhatia and Smith were adamant about not adulterating email. It just wasn’t done. They would feel like they were polluting emails with advertising, and what about privacy issues? If someone is adding a tagline what else were they doing? A user would wonder what else they had access to and they were also fairly certain it was unethical. But Draper wouldn’t let it go. The benefits, he contended, far outweighed the risks. If they were predicating their entire business on the size of their user base, they should be doing everything in their power to increase it as fast as possible. “P.S. I love you. Get your free email at HoTMaiL.” The more he said it, the more he liked it.

The next day Bhatia phoned Draper with the news that they agreed to do it, but without the “P.S. I Love You” part. The impact was almost instantaneous. Within hours Hotmail’s growth took on the shape of a classic hockey stick curve. They started averaging 3,000 users a day, compounded daily. By Labor Day they registered 750,000 users and within six months they were up to 1 million. Five weeks after that they hit the 2 million user mark, adding more than 20,000 signups a day, with Smith desperately trying to keep the servers up and running. At times, the site became sluggish and suffered major outages. But through it all Smith, using little more than virtual spit and glue, kept Hotmail—they had dropped the awkward capitalization by this point—afloat.

The tagline with the clickable URL that Draper insisted that Bhatia and Smith insert into every outbound message served as a promotional pitch for the company. Simply by using the product every customer became an involuntary salesperson. This implied endorsement from a friend or peer made it more powerful—and more far-reaching—than traditional advertising. The receiver of a Hotmail messages could see a.) his friend is a user, b.) it works, and c.) it’s free. Successful consumer branding is often based on user affiliation. (The cool kids wear low cut jeans, so I will, too.) This plays to our tribal instinct. It also resulted in clusters of users. Bhatia sent a message to a friend in India and within 3 weeks Hotmail registered 100,000 users there. It also became the largest email provider in Sweden without spending a nickel on advertising there. In contrast, Juno blew through $20 million in marketing and advertising yet Hotmail gained three times as many users in half the time.

As Jurvetson related in what would become a famous white paper, the Hotmail adoption pattern was similar to that of a virus “with spatial and network locality.” A person’s email address book is a type of virtual social network that is not encumbered by geography. A certain percentage of contacts will be friends, family and colleagues who reside relatively near by; others may be scattered throughout the world. A Hotmail message sent across the country might result in a new cluster of users. Jurvetson noted a “mathematical elegance” to Hotmail’s “smooth exponential growth curves” in the company’s early days: cumulative users = (1+fan out) cycles. “We would notice the first user from a university town or from India, and then the number of subscribers from that region would rapidly proliferate,” he wrote. “From an epidemiological perspective, it was if Zeus sneezed over the planet.”

Come on, people. You’re probably aware of the big Hotmail scandal going on right now, what with some 30,000 account names and passwords having been leaked over the past few days. And now Gmail and Yahoo! e-mail accounts appear to have been compromised. The thing is, these leaks aren’t the result of a software glitch or anything, but the result of successful phishing attacks. I have one question: what the heck is wrong with you people?

Seriously, I don’t understand how, in the year 2009 (nearly 2010!) people can still fall victim to phishing attacks.

Let’s make this clear: your bank, eBay, Google… NOBODY is going to ask you to “validate your account” or anything like that. If you ever see anything even like that, then yes, it’s a scam.

(Phishing scams are pretty prevalent in World of Warcraft, too. You’ll get a message from a player saying something like, “You have won free gold from Blizzard! Just go to www.blizzard-free-gold-giveaway-us.com to claim your prize.” Um… no, thank you.)

Here’s a few tips I can think of off the top of my head:

• Do you even have an account with these people? The other day I got a Pretty Real™ looking e-mail from “eBay” sent to my CrunchGear e-mail account. Now, the e-mail looked real—it even addressed me by my first name!—but for the slight problem that I do not have an eBay account set up with my CrunchGear e-mail account; it’s set up with my old NYU e-mail address. Still, credit to whomever drew up the e-mail, because, again, it looked Pretty Real™.

• If, for whatever dumb reason, you do click on such an e-mail, be sure to check the URL. If it’s something like http://74.98.30.203/ebayaccountverify.php IT’S A SCAM! Same thing if it’s like http://ebay-verify.com: it’s more fake than your average WWE Diva’s breasts.

Again, again, and again: NO ONE IS GOING TO ASK YOU TO VERIFY AN ACCOUNT, OR PROVIDE YOUR USERNAME/PASSWORD AS PART OF AN ANNUAL CHECKUP.

We’re not talking about a small number of users who will be affected. Hotmail is still by far the largest web mail provider on the Internet, with 343 million monthly users according to Comscore. Second and third are Yahoo (285 million) and Gmail (146 million). A year ago Hotmail had just 273 million users, so it is still growing rapidly.

The new features let users search for and insert maps, movie listings and times, in addition to the restaurants, videos, images and business listings that were there before. And all of these have been upgraded with Bing functionality via the API.

Some of these quick adds are quite useful, particularly the maps and movie listings. For the masses that use Hotmail, it’s also a great way to introduce them to Bing.

Screen shots below:

The new feature will be gradually rolled out, starting from today enabling subsets of users in Brazil, Canada, China, Germany, the Netherlands, Norway, and USA to send instant messages from the Windows Live Hotmail and People pages. The feature earlier rolled out to some users users in France, Italy, Japan, Mexico, Spain, and the UK.

I’ve said this before: easily dismissed by geeks and savvy web users, Hotmail has a gigantic mainstream userbase who are not likely going to switch to an alternative webmail service en masse provided Microsoft keeps up with the times and lets Hotmail evolve the way its users are increasingly demanding it to.

But make no mistake about it: Microsoft is ridicously late with adding this functionality to Hotmail.

Your thoughts?

Google launched Gmail only four years ago, and it is now the fourth most popular e-mail service on the Web after Yahoo Mail, AOL Mail, and Windows Live Hotmail. In 2008, it saw some serious growth in the U.S. Google doesn’t break out the number of Gmail users, but comScore estimates unique monthly visitors. According to the latest stats, the number of people visiting Gmail grew 43 percent last year to 29.6 million. In contrast, the much more massive Yahoo Mail grew 11 percent to 91.9 million uniques. AOL Mail finished in second place for the year with 46.6 million uniques (plus another 7.2 million visitors to AIM Mail), while Hotmail actually declined 5 percent to 43.5 million.

How can Gmail keep growing at such a fast rate, when the other email services seem to be stagnating? Maybe it’s because Gmail is evolving at a faster rate.

If you look at any of the major Web portals by subdomain, the email service always comes out near the top in terms of driving traffic (for instance, see Yahoo’s breakdown). Google never defined itself as a portal, but as it added more and more services beyond basic search, creating deeper connection swith consumers by offering them indispensable apps for free was always part of its strategy. And as much as we like to complain about it, email remains on of the most indispensable communication tools out there.

If you look at the chart below, you can get a sense of how Gmail gained against AOl Mail and Hotmail during 2008 (I left out Yahoo Mail because it is so much larger than the others that it skews the chart). At this rate, Gmail could overtake AOL and Hotmail within the next two years. Yahoo Mail won’t be as easy to catch. Although Yahoo Mail grew only 11 percent last year, it still added more visitors (9.4 million) than Gmail (8.8 million).

It’s 2009. Storage is so cheap that Email providers like Yahoo are literally giving you as much space as you want. Yet we still have to deal with archaic policies that allow these Email providers to delete everything in our inboxes if, for whatever reason, we forget to login for a few months.

The time limits vary: Yahoo cuts you off at 4 months, Windows Live Hotmail at 60 days, and Gmail after a more lenient 9 months of inactivity (you can see a more comprehensive listing here). Most of them have some kind of grace period where your account enters a deactivated ‘hibernation’ state, but still retains its data. Some of them have these policies in print but rarely actually delete your account. But for others, once you cross the threshold, every Email message, photo, and file attachment is gone for good.

Take Yahoo, for example. Now that the free service includes unlimited storage, the site uses the threat of deleting your account as a way to convince users to upgrade to its premium Yahoo Plus! for $20/year (you can see the wording in the screenshot below). Since when did my data become a bartering tool?

Of course, all of these services are provided for free – none of them are obligated to give us anything. But they are also loaded with ads, and help drive users to each service’s web portal so they can access their integrated inboxes. Webmail is no charity.

Years ago, when space was relatively costly the restrictions made sense. Now that each service uses excessively large or unlimited storage limits to entice users, one would think that they’d be able to support stagnant accounts. Granted, it’s more complicated than a pure storage issue. Every account is likely backed up multiple times, which multiplies both bandwidth, processing, and storage costs. But given a choice I’d much rather sacrifice my Email’s maximum size limit if it meant I could keep my data online indefinitely.

The issue extends beyond just Email. Earlier this year a spammy chainletter proclaiming that Facebook was deleting inactive accounts (it isn’t) exploited fears of data loss. Now that more services are moving to the cloud, our most vital data (like photos and documents) is increasingly at the mercy of these web companies – an unsettling thought given the precedent set by webmail services. For these cloud-based services to thrive users will have to believe they’re good for life, not just until the company involved holds their data ransom for a revenue boost (or worse – deletes it entirely).

(Image from Failblog)

Oh, and Windows Live Messenger, too.

According to a recent BlackBerry press release…

Windows Live Hotmail for BlackBerry will allow customers to:

• Use BlackBerry ‘push’ technology for automatic message delivery and message synchronization so the customers’ online account is up-to-date with actions taken on their BlackBerry smartphone
• Use a dedicated inbox for Windows Live Hotmail messages, which are automatically delivered to the smartphone. Customers can also choose to receive their Windows Live Hotmail messages, along with messages from other e-mail accounts, within a single inbox on their BlackBerry smartphone
• Display HTML e-mail with the ability to view graphics, Web links, and contact photos in emails

Windows Live Messenger for BlackBerry will allow customers to:

• Send instant messages and join group chats
• Set status and see the presence of friends and colleagues within Windows Live Messenger or their contact cards
• Customize status messages
• Save conversations
• Showcase their Display Picture (Avatar)
• Send and receive pictures and files
• Use more than 60 emoticons

So there you have it. These new features will be available “beginning this summer,” which as we all know could mean as late as September.

We’ve been beta testing Kahuna for a few weeks. It is a big improvement on the old Hotmail interface, using ajax to provide a much more Outlook-like email experience. Features include a three-pane view and drag and drop functionality to folders, etc.

We previously wrote about Kahuna on August 16, 2005 and August 24, 2005.

Kahuna – Extreme Marketing

I am a little bit annoyed right now. Sometimes people get a little too cute. Microsoft’s Kahuna may be falling into that category.

I’m pretty excited about Kahuna because I love ajax and this is going to be one cool ajax application. It looks like (and should be) the new version of Hotmail will act very much like a desktop application. I like that. I want to try it out, and blog about it. And although I don’t always get an invitation to participate in a beta, I usually don’t have to waste a lot of time getting to an answer.

Kahuna is offering beta invites, but require you to read through team member blogs to find out the answers to questions. If you find the answer, you get another hint. Here’s a recent post by Imran Qureshi, the Kahuna Program Manager:

The mail team wants to invite a few more beta testers into the mail beta, but simply adding people is just too easy… so we put together a small treasure hunt:

One of our team members made a post about the origin of the product’s code name, locate his space for your next hint.

WTF? This is stupid. This is not time well spent. This does nothing to build a brand or make me a loyal user. It suceeds only in pissing me off. I’d much rather use this time either testing Kahuna (and most likely writing amazing things about it), or testing something else (there are lots of other profiles on my to-do list).

So, do you guys agree and consider it kind of lame to waste our time like this? Or am I wrong and this treasure hunt is an example of hip, cool, edgey and/or extreme marketing (marketing 2.0)?

I am now done with this particular gripe.

Kahuna Update

Back to Kahuna, Imran has posted additional screen shots and information on the service. He had a previous post where he stated 2 of his top 5 reasons for liking Kahuna.

Today he posted reasons 3 and 4 (leaving us in suspense for #5), along with a new screen shot of Kahuna (see to left):

3. Keyboard shortcuts to read mail
I’m sure the power users will love this. Use “[“ and “]” to navigate the message list and read your messages without using the mouse at all. Combine these with the preview pane and the delete key shortcut to delete messages and you can cruise through your inbox in no time flat. To read a message, click Enter to open a message in a larger view and click Esc to return to your message list. Also, “control [" and "control ]” will allow you to move between mail folders.

4. Change message encoding as you read
Do you get a lot of mails in a variety languages? If the mail itself does not specify the encoding Hotmail calculates the encoding by analyzing the message. You can choose the correct encoding if mail beta’s automatic choice was wrong so your messages look right regardless of the sending language or encoding.

It really does look like Kahuna will be user friendly and fast. Looking forward to future posts on this.

Kahuna (the new hotmail with Ajax) hasn’t launched yet, but the Start.com team (profile) has been working on it seriously since May 2005 and it is now in private beta testing (updated).

From posts by the Kahuna team (see below) and various beta testers (and others watching the space), it looks like it as as signifcant an enhancement to Hotmail as Start is to the old MSN portal. It appears that they will be launching the service under the URL mail.start.com.

Key features include liberal use of ajax to eliminate screen refreshes, an “outlook�? approach to allow reading of emails without leaving the inbox, and a generally faster and cleaner user interface.

Details of the recent history of Kahuna can be found here.

From Imran Qureshi, Kahuna team member:

Top 5 reasons I love the mail beta… reasons 1 and 2

Mail beta is a brand new web mail experience focused on being faster, simpler and safer than existing web mail services (read more). The team focused on the basics of reading and sending mail. Mail beta is a work-in-progress and a large number of beta users are driving what it becomes (we can barely keep up with all their ideas…)

Here’s the first of some of my favorite things about reading mails in mail beta:

1. Fast, faster and faster still Mail beta is significantly faster, I mean by an order of magnitude:
a) The UI responds instantly to many actions and quickly to others
b) Very few context switches (where the whole page changes and your eyes have to rescan)
c) You need fewer clicks to do the everyday tasks
d) Cleaner look (including more “white space�?) so your eyes can relax and find stuff faster

2. Read mail without leaving your inbox using the Reading pane
The Reading pane allows you to read your mail without leaving your inbox. If you like the reading pane in Outlook now you have it in web mail. Other web mail services forces you to open each message and close it before reading the next message. If you have 10 messages to read, they will require 20 clicks, Kahuna: 10. (How’s that for your carpal tunnel?)

Want to see a wide email? Just double click the message and voila!

We’re looking forward to testing this out ourselves.