The Hotmail Story
The Hotmail story started in 1995, which two young men from Silicon Valley, Sabeer Bhatia and Jack Smith decided to start a company that would develop Java programming tools to help publish databases on the Internet. Both of them worked for a different company at the same time and didn’t want to us the company’s email account for their start up. This gave them an idea that sounded much more interesting than java tools-a free e-mail service that could be accessed through the web.
Bhatia and Smith started making the routine rounds among venture capitalists, trying to raise money. After about twenty rejections they came to the venture capital firm of Draper Fisher Jurvetson. Venture capitalists are used to hearing inflatd numbers, but Steve Jurvetson remembers Bhatia’s as being “the most hallucinogenically optimistic forecasts that you could imagine.” Still, DFJ liked the idea and gave the men $300,00 in seed money.
In the course of their meetings, Tim Draper of DFJ suggested that they add a line at the bottom of each e-mail messages sent by a subscriber of the service: Get your free e-mail message at Hotmail.com.” This, he thought, would help spread the word as people used the service. Bhatia and smith were concerned initially that this might turn people off. ’It took a meeting or two before they agreed,” Jurvetson recalls.
The service was launched on July 4,1996,Independence Day. The day was symbolic of the fact that their e-mail service was independent of the fact that you’re computer, or any software or portal. As people found out about the free service, they would tell their friends.
The word started to spread both electronically and as a result of face-to-face conversations. it was good old word of mouth marketing, at Internet speed. One person would adopt the service, and others would follow in just days.” We would notice the first user from a university town or from India, and then the number of subscribers would rapidly proliferate.”Jurvetson and Draper wrote.
Students were one early group to adopt the service. Before Hotmail was available, they juggled e-mail addresses between school, home, and summer jobs. Now they had one e-mail address that was accessible from any computer with Web access.
The viral marketing strategy used was:
1) Give away free email address and service
2) Attach a simple tag at every free message sent out “Get your free, private e-mail @ http://www.hotmail.com”
Within two months of its launch, Hotmail had more than 100,00 registered users. Bhatia and Smith went around Silicon Valley with beepers, hooked to the server that buzzed whenever they reached a certain benchmark. This buzz was very helpful, as they were going through their second round of financing. On November 11 the company announced that it had more than half a million subscribers, Eighteen months after its launch, Hotmail had 12 million subscribers. Looking back at Bhatia’s “hallucinogenic ally optimistic” forecasts of subscriber growth, Jurvetson comments, “He more or less hit them or beat them”.
Hotmail "piggybacked" on personal emails from one person to another to publicize their free email service. At a time when few people had email, the first and only free email service in the marketplace was appealing and novel -- hence their rapid adoption and spread. However, the same "piggybacking" technique currently employed by all free email providers (except gmail) no longer works. Furthermore, the Hotmail users did not voluntarily pass it on; they had no choice about Hotmail adding the "sign up" link at the end of their personal emails.