Yahoo looking into free email

Is Yahoo quietly laying plans to offer free Web-based email later this year?

Is Yahoo(YHOO) quietly laying plans to offer free Web-based email later this year?

That's the word buzzing around the online industry, although company executives remain coy. Such a move would shake up the nascent but burgeoning business because Yahoo is such a strong brand on the Net.

A Four11 spokeswoman and a source close to Hotmail both said today that Yahoo had held discussions with them for offering the product in a cobranded deal. Yahoo already has a parnership with Four11 to offer a Net telephone directory, perhaps giving Four11 an edge in the talks, sources said.

One source noted the discussions had been going on for about a month, spurred on by Excite's announcement to offer free email last month. Excite, the Net directory industry's No. 2 player behind Yahoo, teamed up with another free email company, WhoWhere, to offer free email.

Jeff Mallett, Yahoo senior vice president of business operations, refused to confirm any talks or future plans for free email except to say there had been no "official" announcement of any such deal. He did say, however, that the company has said before that it would consider all forms of online communication for its Net directory. Excite offers another online offering that Yahoo doesn't: Internet messaging.

Yahoo's foray into the free email business would reshape the new market because of its well-known brand name and huge user base. As of June 30, the company reported that it received more than 38 million page views per day.

Online services such as America Online find that email and chat are among their most popular features. But Web-based free email and Internet messaging gives Netizens another option that doesn't cost $19.95 a month. In response, AOL has begun offering its own Net messaging. (See related story)

Free email players now include Hotmail, Four11's RocketMail, WhoWhere's MailCity, Juno, and NetAddress. Some companies, such as Freemark Communications, have been forced out of business, largely because of the intense competition. Moreover, another shakeup is expected.

Still, Web-based message services are one of the hottest, fastest-growing products on the Net. Hotmail, for example, has 6.1 million customers and is adding more at the rate of 40,000 per day. The company is generating more than 9 million page impressions daily. On the other hand, free emailers have been dogged by complaints by Netizens that accounts often are forged or abused for spamming, causing some marketing problems.

Both Four11 and Hotmail would like to license their Web-based email technology to Net companies, just like WhoWhere. One industry source said the bidding between the two companies had been fierce. One potential winner in the Yahoo deal could be the high-technology venture capital firm of Draper, Fisher, Jurvetson, an investor in both Four11 and Hotmail.

Analysts expect Yahoo to weigh in with free email. "Excite did it, and I'd be surprised if Yahoo didn't," said Keith Benjamin, analyst with Robertson Stephens.

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