Reproduced from an article I posted in Linkedin November, 22 2015 . Yahoo since then is dead and is now an investment company managing whatever assets are left. However this is still the direction i foresee for free email services.
Free Email was the first service I acquired on the web in 1998. It was then called Hotmail. Sold at 400 million and made an Indian very rich. Why ? Simply because it was the best way to acquire customers. You could always monetize it with advertising, so give it away free. New medium. Let users adopt. Why create any friction.
Free email monetized with advertising is a myth
Before the rise of messaging apps Whatsapp, Facebook messenger, Viber,WeChat etc, Snapchat there was still revenue to be made. Even if we do use the mail service, most of it is on the phone. First to make personal messaging redundant was Twitter, followed by all the messaging apps. Now if personal messaging becomes redundant on email, you stop generating page views and banner inventory that leads to revenue.
Personal Email continues to grow and acquire users, but usage, of the medium i.e page views and Ad banner views continue to drop per user.
This is especially true of fast-growing Internet markets like India. It’s likely that the 300 Million plus with have 900 million email ids between them. This market is growing 30% CAGR per year, so the overall email number growth on a large base will be huge. The number of redundant email ids to manage will also be huge.
This is a leaky bucket situation. There is a cost of user acquisition and a monthly cost of user services to the service provider. However,the advertising inventory generated by existing users and new users is shrinking. Users want an email address to sign up for a number of services on the net, but prefer to message on the messaging services. So they are a cost and not a revenue stream.
Over the Top of Email
This is the same problem telecom companies have of messaging services eating into their voice and text revenue. Messaging services over the top are also eating into email advertising revenue. All messaging services use email for registration and notifications.
Will Gmail be as valuable as WhatsApp? $100 Billion?
In India, all this growth is adding to the losses of the email service providers. No email service is a stand-alone application. How do you justify losses for this as a valuation business? WhatsApp was acquired at $19 Billion and is seen as the $ 100 Billion Unicorn.
Gmail is on mobile, has messaging, file transfer, voice etc – Android and IOS. Yet we will we not give it the same valuation as WhatsApp. Incidentally, it has higher reach too. The reason is that it’s FREE. If it changed to a paid subscription model, your valuation perception would change too for Gmail.
Free Email services will have to charge or go out of Business to applications like WhatsApp
Like telecom companies, Free Email services will have to charge or go out of business to WhatsApp. In the future, they cannot sustain themselves on advertising. If users grow and revenue does not, your valuation will also drop and services like WhatsApp will take over. Now is the moment to do a shake out. Better to have 10 million paid users than 30 Million free registered users.
Will you pay for Free Email?
The answer is a resounding yes! I will pay for my primary and maybe a secondary service. I need this to register, for notifications. Need it for bills and newsletters. It’s my digital address.
About the author Arvindra Kanwal
Though my bio is visible on my profile, I would like to share some aspects that allow me to claim expert status here.
I was CEO and founder of India.com A portal and Free Email service. My experience was exactly as outlined. I kept acquiring India.com free email users, but could not monetize them adequately through advertising. I could not move to a subscription model as I was a startup and minnow to Gmail, Yahoo and Rediff. But Yahoo and Gmail can. Marissa Mayer should be listening. This is the answer to Yahoos’s revenue. Gmail will stay free, does not need it anyway. All users will not migrate to a free service. They are too invested in their address to give it away.