Mahkameh Yaghmaie

Tannaz Alinaghi

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HistoryThe foundersThe conceptThe capital

The beginning The growth The competitors Options Solution

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Founders (colleague)Sabeer Bhatia Jack smith

Initial goalWeb-based DB: JavaSoft

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Full time workers The need to set aside some extra hours

outside the workday Difficulties in communication Web was just a directory of information The idea of a web-based communication

tool

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No ISP or email provider subscription Free service Revenue model based on marketing

Provide access to subscribersTrack subscribers’ surfing habitsAllow advertisers to customize advertising

information

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December 1995 Venture capital firm of Draper Fisher

Jurvetson (DFJ) For the purpose of selling a web-based

DB DFJ happened to like the email idea

more DFJ granted $300,000 for 15% of the

company

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DFJ started viral marketing for HotMail Viral marketing happens when users of

a service or product advertise the service or product by simply using it

In hotmail, a message ends with an advertisement directing the recipients to the hotmail registration site

This is not junk-email It is not very different from a banner ad

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Initial marketplacesConsumer marketCorporate marketPackaged web email product with Hotmail’s

software Bhatia decided to focus on the first

marketplace

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Salaries and stock options were used to attract employees

“My greatest accomplishment was not to build the company, but to convince people that this is their company. I showed people how this would ultimately benefit them. . . . We initiated the avalanche.”

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Launch100 subscribers in the first hour100,000 subscribers in a month1 million in less than six months

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Growth issues: Intermittent service outages Junk mails

Solutions Never restricted number of users unlike Juno Implemented a new, highly scalable and

redundant architecture Able to sustain more than 50,000 new users

a day Provided filters for users Automatic control on the mailing behavior of

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“We’re particularly excited about the load balancing design of this architecture, When [users log] on to Hotmail, they get the least busy path to their e-mail, which dramatically enhances their online experience.

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In 1997 over 5 million subscribersSecond largest email provider after AOL

Competitive advantagesNo need to subscribe for a special internet

accessRevenue model based on advertisingGeographic expansionNo limit on the number of new subscribersEasy to subscribe

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Hotmail optionsMerge with a large portal like MSN

Microsoft lacked a free web-based email serviceGo public

Huge competitors like AOL and CompuServe with a huge capital

Remain private Juno and USA.net continued to thrive

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For company survivalDevelop partnership

OrRisk giving away potential profits to the

competitors Accept Microsoft Offer for partnership

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