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Yahoo Beefs Up E-mail
By Mark Evans | March 23, 2005
Nothing like a little healthy competition to convince companies they need to be nicer to customers. Exhibit #1 is Yahoo's decision to quadruple the amount of storage space on Yahoo Mail to 1GB from 250MB. The official line is “we want to meet the needs of our customers”. The unofficial reason is Google's Gmail already offering 1GB so Yahoo can't be content to stick at a piddly 250MB. Meanwhile, Microsoft's Hotmail operates in Never Never Land by continuing to provide 2MBs of storage. You wonder why anyone would stay with Hotmail, which used to rule the Web-based e-mail market?
It's interesting while Yahoo feels compelled to offer more to convince people to keep using a free service, Plaxo Inc. is trying to get people to actually pay for its online address book service - you know, the one where a friend or colleague makes you fill out your information before Plaxo tries to convince you to sign up as well. Anyway, Plaxo is deperately trying to find a way to get its five million users to pay a whopping $2 a month for the service, while launching a $29.95 a year premium service. It's a nice, pragmatic plan but it likely won't work too well. Once people get something for free, its pric point has been established. The question facing Plaxo is how many premium subscribers does it need to make itself a real business? If it gets 100K subscribers, that's $3-million a year - probably enough for 20 employees and a small sales and marketing budget but not enough satisfy its VCs. A better business proposition would be 1M subscribers, or $30-million in annual sales. Chances of doing that? Probably next to nil.
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March 23rd, 2005 at 11:25 am
So if I do the math correctly just based on what you've said…. if Plaxo is able to earn $2.00 per user, in order to achieve $30M/year they would need 15M users. I believe they currently have 5.5M users, up from 1M just a year ago. If the rate continues, they will have nearly 10M users at the end of this year, and somewhere near 20M users next year. If those numbers means their chances are next to nil, next to nil looks pretty good.