It wasn’t that hard to be seen as a tech bigwig in the mid-90s. All you really needed to impress the masses was a stunning email address, or email for short.
Savvy internet users who wanted to go the extra mile would forgo the standard email address issued by your ISP in favor of a custom address from a third-party vendor. Back then, there was no hotter provider than the aptly named Hotmail. The true elite would even have a GeoCities website, but that’s another story for another day.
$4,000 and an idea
The free messaging service was created by Stanford classmates Jack Smith and Sabeer Bhatia. They raised $4,000 to build a prototype in 1995, which led to a $300,000 investment from venture capitalist Draper Fisher. Hotmail was launched soon after, on July 4, 1996, to symbolize freedom from ISP-based services.
To put that timeline into perspective, Hotmail landed just a day after the movie Independence Day was released.
The name was originally stylized as Hotmail in honor of HTML, the markup language used to create web pages.
As one of the first webmail providers, Hotmail allowed users to access their inbox from anywhere in the world as long as they had an internet connection. Those who signed up for an account were also free to come up with their own prefix, or the text string before the @ symbol. Looking back, I can only imagine how many juvenile Hotmail addresses were created during this time.
Hotmail was an instant hit even with its 2MB storage limit, which is laughable by today’s standards, but it seemed pretty decent if not sufficient at the time. In the first 30 days, Hotmail had attracted over 100,000 subscribers and registered its first million in less than six months.
The Microsoft era
By the time Microsoft entered acquisition talks in late 1997, Hotmail would have had 10 million subscribers worldwide and controlled a quarter of the webmail market. America Online (AOL), the largest email provider in the world at the time, had 12 million registered subscribers.
Bhatia told the Indian Express at the time he was initially wary of Microsoft due to its monopoly reputation, but said CEO Bill Gates had “not lost the ability to spot what was going on”. The acquisition of Hotmail was validation of this vision, he added.
Hotmail eventually agreed to sell to Microsoft in a stock exchange deal reportedly valued at $400 million, which struck some of the early Internet millionaires.
Microsoft wasted no time in capitalizing on its newfound strength, integrating Hotmail into its MSN group of services and localizing it for markets around the world. The initiative has been a resounding success, as the service’s user base has grown faster than any media company in history. In early 1999, MSN Hotmail had more than 30 million users and was adding 150,000 new users every day.
Email was the most popular online activity at the time, with more than 80% of Internet users adopting it. With MSN Hotmail, Microsoft offered a fast, free, reliable service that was above all accessible from any computer with Internet access. With few competitors, it’s easy to see how the service has grown as quickly as it has.
Security issues and Google
Problems arose in 1999 when hackers released a vulnerability that allowed anyone to log into a Hotmail account using the “eh” password. Microsoft has denied a theory suggesting it was a backdoor accidentally left in place by the developers, calling it an “unknown security issue” instead. Whatever the cause, the problem was described by Wired as probably the most widespread security incident in the history of the web.
A similar situation occurred in 2001 when he was discovered that anyone could log into their Hotmail account and create a custom URL to read private messages from other accounts, no password required. All that was needed to zero in on a specific target was their username and a valid message number, the latter of which could be guessed by brute force using specially designed software.
For fuller context, 2001 was the year Microsoft launched Windows XP alongside Internet Explorer 6. The Redmond-based company was the technological force to be reckoned with, but at that time it faced the browser wars (against Netscape) and the impending antitrust lawsuit against the US government where it was accused of illegally maintaining a monopoly position in the PC market.
Obviously, there were more than a few distractions in the air, and Microsoft didn’t do very well on the security front for a few years.
But ultimately, those issues paled in comparison to what would prove to be a far greater threat to Hotmail’s dominance. In April 2004, Google launched Gmail as a beta project, offering 1 GB of free storage. The offer was brilliant from a marketing standpoint, and a full gigabyte seemed like free, unlimited storage compared to what other webmail services offered. This forced other major players – namely Microsoft and Yahoo – to step up their games and led to a number of innovations in webmail, but let’s not venture too far.
Hotmail still capped users at 2MB of free webmail storage when it launched Gmail. A few months later, it upgraded the capacity to 250MB for free accounts and the ability to send attachments up to 10MB.
While Google was busy doing its own thing with Gmail, Microsoft was supposed to be hard at work on a new email system that would only be released in beta as Windows Live Hotmail in mid-2007. In the Internet years, this took far too long, leaving Gmail to gain momentum, while Hotmail was seen as antiquated and just a tool for Microsoft to exploit – not much different from the downward spiral experienced by MSN Messenger.
Redmond spent the next few years rendering the service faster (but not really fast enough), easier to use and more reliable, adding support for Firefox and Chrome, and integrating Bing search along the way. In 2010, Microsoft’s “Wave 4” update enabled more features, including 1-click filters and inbox scan. Exchange ActiveSync support will follow soon, and in 2011 we saw the addition of aliases, instant actions, scheduled scans, and SSL enabled by default.
From Hotmail to Outlook.com
Microsoft hasn’t been able to clean Hotmail of the tarnished reputation it has earned among tech enthusiasts and youngsters until now. The service was also particularly popular among spammers. Efforts to combat spam, including update its anti-spam policy and reserving the right to terminate any account that violated its terms of service, ultimately did little to remedy the problem.
“A lot of them wouldn’t look at Hotmail and say, ‘I don’t feel comfortable having this next to my name.’ …People understand that Outlook is mail from Microsoft, so we thought that branding made sense,” Brian Hall, General Manager of Windows Live noted in a 2012 interview with VentureBeat.
Microsoft’s new consumer-focused email service, Outlook.com, launched in beta in July 2012, with a clean, modern design. Existing Hotmail users were given the choice of keeping their @hotmail.com extension or converting it to an @outlook.com address.
It was an instant success as over 10 million users voluntarily signed up for Outlook.com in the first two weeks.
The service left beta in early 2013, and by May Microsoft had completed the migration from Hotmail to Outlook.com. The company said at the time that it had 400 million active Outlook.com accounts, compared to Hotmail’s peak of “over 300 million”, thanks in part to organic growth stemming from enthusiasm for the new product.
Skype, dark mode and more
Microsoft has continued to bolster Outlook.com with new features over the years, including Skype integration, IMAP support, and third-party add-ins. Redmond even experimented with a paid version of the service called Outlook Premium, but eventually rolled those features into Office 365.
Another security breach occurred in early 2019 when a hacker used the credentials of a customer support agent to gain access to a small number of consumer email accounts. The impact of the breach was not that damaging, but Microsoft’s handling of the situation was questionable.
Dark Mode arrived a few months later, boosting battery life and helping reduce eye strain for those who chose to use it. And really, that’s where this story ends for now as there haven’t been any other major announcements regarding Microsoft’s webmail service.
Since Microsoft migrated Hotmail to Outlook, go to http://www.hotmail.com redirects you to Outlook’s webmail service, which currently resides on the outlook.live.com domain.
Millions of @hotmail email addresses still exist and remain in use alongside its many other forms (@live, @msn, @passport and of course @outlook), and even today you can still create a new @hotmail email address. However, email is no longer a strong suit among web properties. To Microsoft’s credit, there is a neutral to positive perception of Outlook.com and the service they offer today.
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The story of software applications and companies that at one time reached the mainstream and were widely used, but are now gone. We cover the most significant areas of their history, innovations, successes and controversies.