By Joia Shillingford

BBC News business reporter



Gmail is available by invitation only as it is still being developed

Stuart Anderson, Microsoft's Hotmail business manager in the UK, keeps online shopping receipts in his mailbox in case he has to query anything later.

"People are keeping a lot more information in their e-mail accounts for retrieval at a later date," says Yahoo!

Web-based e-mail services like Hotmail, Yahoo!, Gmail and AOL Mail on the Web are becoming databases by default as a growing number of people use them, to store data and photos so they can retrieve them from anywhere.

Growing trend

Filing could become a thing of the past for e-mail users

The trend has become more pronounced as the services have dramatically increased their storage capacity in response to upstart Gmail offering a free service with more than 2,000 megabytes (Mb) of storage.

"E-mail is a way of interacting not just with others, but also with yourself, " says Mr Harik, who is director of Googlettes (new Google services). "You want to remember something, so you send it to your mailbox."

For all but the very organised, old e-mails will contain phone numbers that haven't been entered into a diary, names and addresses of contacts, meeting or customer information, useful statistics or competitor information and photos of products and people.

The market for web-based e-mail services is still growing. "In the US, it grew 3% between April and November 2004," said Andreas Gutjahr, marketing manager, UK & Germany, for Neilsen//NetRatings, a Nasdaq-listed internet research company.

He says the number of minutes users spend connected is also rising.

Money maker

But even where there is a small subscription fee, e-mail does not make much money in itself. The prize is in the number of users - and therefore advertisers - the providers can lure, not just to their online mailboxes but also to portals like MSN and search engines like Google and Yahoo!.

Gmail "will be very profitable for us," says Mr Harik.

But if web e-mail is being used for more than just sending and receiving messages, how will this affect the market shares of the different providers?

One possibility is that Hotmail's market dominance could be affected by rival services better equipped to search through thousands of e-mails.

Rival offerings

Yahoo's search engine expertise benefits Yahoo! Mail users

Both Yahoo! and Google have had internet search engines as part of their core business from the start. So they are well placed to offer efficient e-mail searching.

Gmail was designed with the idea of searching for unstructured, unfiled information in mind. Mr Harik says: "We've taken away about 70%-80% of the reason to file things."

However, he believes: "It might still be worth filing e-mails related to a specific project, where comprehensiveness (finding every single message on a topic) was important."

"We have a labelling system that enables you to label messages in more than one way. Also our conversation feature enables you to see all the messages in an e-mail conversation."

Global Audience in Nov' 04 MSN Hotmail 61.25m Yahoo! Mail 55.50m AOL E-mail 34.64m Neilsen / / NetRatings

(User figures cover US, Brazil, Australia, Hong Kong, UK, France, Germany, Sweden, Italy, Spain and Switzerland)

Google will also search users' e-mails for keywords so that it can place adverts in mailboxes relevant to users' interests. On the one hand, this may make adverts more useful. On the other - though users' identities won't be revealed to advertisers - it does raise privacy concerns.

Gmail is currently available by invitation only as it is still under development. But it recently increased the number of new users that existing customers can invite - from 10 to 50 - suggesting it is pushing Gmail out to more people.

Yahoo! Mail says it has developed its e-mail searching too. "This can be done through the new prominent 'Search Mail' and 'Search the Web' buttons within the e-mail box," said a spokeswoman. "Enhanced searching tools have become increasingly important as storage limits have increased."

Limited options

By contrast, the search facilities on Hotmail are quite limited only allowing searches in the To, From and Subject fields of an e-mail and not in the text of a message.

Moreover, since Hotmail increased the amount of free storage it offers, the search facility sometimes won't work at all for users with a lot of e-mails.

For now, Microsoft - which has a separate search engine it upgraded this month - is focusing on integrating Hotmail with other Microsoft applications like instant messaging and blogging. It is not planning to upgrade its Hotmail search facilities, according to Mr Anderson.

Challenge looms

Web mail storage Hotmail: 250Mb Gmail: 1,000Mb Yahoo! Mail: 250 Mb AOL Mail on the Web: 100Mb Hotmail Plus: 2000Mb(£14.99) Yahoo! Premium: 2000Mb( £11.99)

Competition may be taking its toll on Hotmail. "If we look at Europe, they [Hotmail] actually went down from a monthly audience of 25 million users in April 2004 to 22 million in November," said Neilsen/NetRatings.

During the same period "Yahoo! increased by 2% from 9.6 million users a month to nearly 9.8 million," he added.

The number of minutes spent accessing Hotmail in Europe also fell - from 47 minutes a month in April to 38 minutes last November.

Meanwhile usage of Yahoo! Mail increased by just over 12 minutes a month to 52 mins.

Hotmail has added new features like instant messaging

But Mr Anderson says Hotmail is not planning to give up its dominant share of the web e-mail market any time soon. It has recently been encouraging users to sign up for more than one mailbox and has introduced a series of Hotmail.co.uk mailboxes so people who missed out on getting the user name they wanted have another chance.

"We've put a huge effort into upgrading our 187m users," says Mr Anderson. "If we find people are using Hotmail as a dumping ground [for information] and not being remotely organised, we will develop the product.

"We are determined to stay ahead."