The four giants of the Internet — Microsoft, Google, Yahoo, and Facebook — are all putting a lot of money into Web-based email, but none of them expect to make a lot of money back. Instead, email is used as bait for other more profitable products.The realities of the business — low advertising rates and clickthroughs — are one reason why innovation in email is so slow. Gmail representative Paul McDonald also said that every time they test a major change, users complain.
The companies spoke at a panel at Inbox Love conference, which is devoted to email — that old-fashioned but absolutely necessary tool that still takes up a huge portion of everybody’s time.
organiser Dave McClure noted that all of these services (except for Facebook’s new messaging system) have hundreds of millions of users,then asked whether any of the services make money. Not one of the companies on stage would give an unequivocal “yes.”
Hotmail’s David Dennis talked about Hotmail driving traffic to Bing and promoting new features of Office, but said that Microsoft does not necessarily think of it as a profit centre.Yahoo’s Miriam Gellar gave the same answer: mail drives a lot of traffic.
Google’s Paul McDonald said that Gmail is the main driver of Google Enterprise sales, but wouldn’t say whether it’s profitable. Facebook’s system is too new to generate much money yet, but the company’s Peter Deng also dodged the question, saying simply that it’s “part of the broader ecosystem.”
In other words, email is the loss leader — like the heavily discounted product that gets you into a store where you’ll hopefully buy more profitable stuff. Loss leaders typically aren’t a centre of innovation.