In 1997, the 400 million dollar acquisition of Hotmail by Microsoft was a case where both parties needed each other; in one hand, Hotmail needed new services for its members: personalize information, e-commerce, multimedia content, and in the other Microsoft needed a new mail service to add to its MSN (Microsoft Network) Portal.
Hotmail has become one the faces of Microsoft, its big base of users was one of the major factors that contributed to the acquisition and allowed MSN to use it as a tool to drive traffic to its revenue-generating sites, such as Expedia and CarPoint, and keep them within the Microsoft circle; and at the same time, creating very useful features for all the customers of both MSN and Hotmail, such as mail search, web search, new interface, customization, advertisements, integrate msn with hotmail, msn messenger, Windows Live, My space, even games and music.
Without the acquisition, Hotmail would’ve had higher competition with Yahoo Mail and Gmail rising, but with it Hotmail was able to keep up and exceed them in features and stay as the leader of Web base mail service.
This acquisition demonstrates how two companies can complement each other’s business models, enhancing Hotmail’s functionality and at the same time adding web base mail service – one of the main features in portals – and a large base of users to the MSN community, improving even further its capabilities as a leader in online communication and information.
If you want to know more about this topic, you can check the following links.
http://www.microsoft.com/presspass/press/1997/Dec97/Hotmlpr.mspx
http://www.news.com/2100-1033-206717.html
http://findarticles.com/p/articles/mi_m0FOX/is_n2_v3/ai_20952789
Team 3
3 Comments
October 22, 2007 at 9:17 am
One of the team members in team 2 is actively using hotmail and msn right now. The acquisition of hotmail by Microsoft is successful in terms of its popularity among the email and free email services. However, unless the cost of Microsoft Email service development exceed 400 million dollar, they should have the capability in developing there own email services with the same success using similar strategy for running hotmail. Acquisition to capture the market size is one of the reasons as hotmail had 9 million users at the time. Further information for hotmail’s email service advantages need to be discussed to justify the success is due to both hotmail and Microsoft competitive advantages. Or else, Microsoft might have a greater contribution for hotmail’s success than the original hotmail founder company.
October 22, 2007 at 11:42 am
We think that this is a profitable acquisition. First, since Microsoft gives its customer suitable services when they are offline, such us the software, it must give a successful service on line, such us free e-mail.
Second, Hotmail offers the most feature-rich Web-based e-mail service and it is the only browser-based e-mail service that’s proven itself by gaining more than 9 million subscribers. As a result, Microsoft gained those million of subscribers.
Third, the merger with Microsoft has made Hotmail a more feature-rich service by accelerating product development cycle times with the addition of key Microsoft resources. It means that customers have many new opportunities to enjoy.
Fourth, there weren’t drastically changes. The service had all the same features, and users kept the same address. Besides, the basic Hotmail service will always be free, while there are offer premium services for a modest charge from time to time.
Fifth, given that Hotmail has a pretty extensive subscriber base, and many of these subscribers use Netscape, it would defeat the purpose of the acquisition for Microsoft to phase out Navigator or any other browser, or make Hotmail work exclusively with Internet Explorer. This will help a more profitable business.
October 23, 2007 at 10:25 am
We think this acquisition is a win-win situation. From a marketing point of view, if Microsoft did not acquire Hotmail and, instead, creating its own email service, it might not be able to get this large number of users right away. It had to start from scratch and also had to compete with Hotmail. Plus, since Microsoft was not specialized in providing email service, its email service might not get as popular as Hotmail. It would be lots of uncertainty if they decided to get into the market of email service provider by themselves. In contrast, when they adopted Hotmail, they literally claimed their large base of users, and moreover, a lot more exposure of their brand. They both entered the market of email service provider, and also put a lot of potential advertising of their company.
As of the benefit of Hotmail, it gets this huge profit from selling the company. It also gets lots more exposure with other Microsoft affiliated tools, such as MSN, Expedia, CarPoint, Windows Live, My space, game, etc. This acquisition actually increases Hotmail’s features and makes it capable to compete with other email service providers like Gmail and Yahoo Mail.