Apall of gloom hangs over the students' hall at the local university. The students' most handy tool of communication—for some, the only mode of staying in touch—is under threat. For years, they have depended on it and shared their darkest secrets through it. Suddenly, their most trusted friend, free e-mail, is becoming a paid service. They can't believe it's happening.
Last fortnight, netaddress.com, a popular free e-mail service provider, announced it was going to charge for its usa.net service from July 31. Before users got over the shock, India's own 123India.com, with over 2 million users, announced that from August 1, it too was ending the freebie era. Tech portal ZDNet has discontinued its free e-mail services in the UK and Australia once their partners who paid for the service withdrew. Yahoo! has introduced certain paid premium services for its mail users in some countries to test the waters. How long will it be before free e-mail becomes history?
The writing has been on the wall for quite some time. Says Shvetank Shah, ceo, ZDNetIndia: "It was really a question of who's going to bell the cat. With the slowdown in the dotcom sector, revenue has taken a serious beating. In such a situation it doesn't make sense to provide free services." Revenue graphs all over the dotcom world are pointing south with online advertising slumping by as much as 30 per cent in the current year. Subscription was the only way out.
Feels Iqbal Gandham, chief technology officer, Net4India: "The industry was moving on the principle 'Do it now, and plan later'. This business model was not successful and over a period of time more and more of these service providers have started looking for concrete revenue streams." Also, in the first phase of the Internet revolution, everyone was looking at capturing a large customer base. Once that was done, they now want to sell the services to them through the window they created through their free services.
Netaddress' usa.net, which claims to manage over 30 million messages a day, was the first major e-mail service to take the plunge. A message posted on the website said: "In today's changing business environment, revenue sources are no longer adequate to support our netaddress free e-mail service."
So too, 123India.com. On July 6, it mailed all members a message, signed by co-founder Arvind Kajaria, saying: "Due to the softening of the advertising market, free Internet services are no longer sustainable unless they are severely restricted or neglected. Thus we are convinced that moving forward, subscription is a more superior way of keeping our services reliable, innovative and meaningful. With almost every e-mail service to get charged soon, we wish to introduce to you a service that not only takes care of your e-mail but goes beyond that..." 123India has asked its members to pay between Rs 599 and Rs 999 for six months to 12 months' subscription and also plans to introduce an introductory package of Rs 99 a month for people to experience the flavour of the paid regime. Usa.net wants around $30 per year per head.
The growth of free e-mail has been stunning. From the birth of the first one, Hotmail, five years ago, the market has exploded to 1,500 service providers in 85 countries. There are about 400 million people online across the globe and every one of them uses e-mail. A majority has chosen the free e-mail route as their primary mode of written communication with the rest of the world and have, over the last few years, become totally dependent on it.And most have taken the zero price tag for granted.
Will the subscription model succeed? Why not, say experts. They feel that when most dotcoms were fighting to attract eyeballs and numbers, aol standardised a model generating steady subscription income. While the dotcoms scoffed at aol then, the latter is having the last laugh now with revenue from over 29 million subscribers. However, other than pornography sites, the number of websites which have been able to get away with charging users remains small. The web versions of The Wall Street Journal and The Economist have done well as subscription sites, but the list practically ends there. Even Hotmail owner Microsoft's attempts to charge for slate.com, its magazine site, failed.
Are people ready to pay for e-mail? "No. They are used to free e-mails for far too long. Some people might just start using their company e-mails more than their personal IDs because that will be anyway free for them," feels Gandham. As things stand, the majority of users, at least in India, would agree with him. Says an 'e-mail addict': "I will just switch to Hotmail or Rediff, and when they turn into pay services, to other free service providers." People have already started migrating from usa.net in hordes.
There are of course the more rational users. Says journalist Sudha G. Tilak: "I am not shocked at all. I am ready to pay for one account because the kind of work I get out of e-mail is tremendous. It's the best form of communication." Most others like her are ready to pay up to Rs 1,500 a year provided the service is good, fast and reliable. Says Shah: "People will slowly accept it. The only change will be that from seven to eight accounts, people will be left with only one. And when people happily manage one telephone number in a lifetime, this doesn't seem too impossible."
There may, however, be other problems for the paid e-mail services. Says Gandham: "The biggest one is that of payment collection. Netaddress has a large base of customers outside America. How the payments are going to be collected remains a big question." Agrees Shah: "Since usa.net insists on payments through credit card, it's membership is expected to drop drastically as the number of people with dollar credit cards in India is relatively low." Add to that the fact that a sizeable number of e-mail users are students who do not have a credit card at all.
So, despite Kajaria's warning that most services will soon become paid ones, the industry feels it will take some time before the e-mail fantasy ends. Says Gandham: "Larger players may not follow, considering that they have many other revenue streams and their e-mail services might be just a window to these services. Smaller to medium players might start charging to sustain in the long run." Says Deepak Chandnani, country head, Yahoo! India: "Users may be more inclined to choose a mail provider who has stable revenue sources since they will perceive that these providers will be able to give them continued service free." Others feel that big fish like Yahoo! and Hotmail might just improve services and keep it free till the smaller ones perish and then attach a price tag. However, nearly everyone Outlook spoke to agreed that by the second half of 2002, there won't be any free e-mail services left.
This is the beginning of the end.