Hotmail's replacement is going Dutch

Although the Redmond, Wash.-based company moved the Hotmail successor out of beta Thursday in The Netherlands, Microsoft won't have the final version in the United States and elsewhere until next year, later than it had planned.

The Netherlands has almost 16.5 million residents, a third of whom have a Hotmail account, according to Richard Sim, product planner for Windows Live Mail. Windows Live Mail is replacing Hotmail.

About 10,000 Netherlands residents signed up for accounts within hours of the launch, he said.

The launch marked the first time people anywhere could sign up for a new Windows Live Mail account, although existing Hotmail users have had the option to migrate over for some time.

Windows Live Mail is a key component of Microsoft's new set of Live products. The desktop software leader announced a move to Live services a year ago to better compete against Google and other companies thriving in a world of ad-supported Web services.

Microsoft has been working on its new free e-mail product for about two years and launched the beta version November 1, 2005. The company has had its share of challenges in moving from the well-known but aging Hotmail service to Windows Live Mail, including incorporating more Office-like features without alienating users not familiar with the desktop software.

"Windows Live Mail is an entirely new product we've built from scratch," Sim said. "It includes a completely new set of code we've done to re-architect the front end, and involves migration to a whole new back end, and storage that allows us to scale, index and search in ways that weren't possible before."

Microsoft engineers are looking at the Dutch launch as a "preview" and an opportunity to get user feedback and make further improvements to the product before subsequent launches, Sim said.

"We recognize that we will have some key new learning from this launch and we will incorporate that into the product," he said. "We want to be ready and for the quality to be there" before releasing it into larger markets like the U.S.

Besides having to create a new system from scratch, Microsoft engineers have had to deal with resistance to interface changes on the part of Hotmail users. Hotmail customers initially balked when Microsoft removed the checkboxes from Windows Live Mail, but Microsoft added them back as part of a classic mode option. In May, Hotmail had to revert back to an older test version of Windows Live Mail after encountering issues with one of its earlier updates.

It was late on a Friday when that update was pushed out and the Mail team immediately noticed things were not going smoothly. For some Hotmail veterans it was reminiscent of the days when they tried to update the software, only to have it fail under the crush of millions of users. It's not as bad as in the old days, but "there were the flashbacks," program manager Ben Poon said in June.

Windows Live Mail includes desktop software features like keyboard shortcuts, the ability to select multiple e-mails and drag-and-drop functionality, as well as a safety bar that alerts users when it detects potentially fraudulent e-mail, he said. Microsoft decided to remove one of two large ads after beta testers said it cramped the screen, he said. Microsoft also has doubled the amount of storage, to two gigabytes.

Eventually, Windows Live Mail will have a "unified in-box" to receive different types of communications like instant messages, faxes, video mail and RSS feeds, in addition to e-mail, Sim said.

The introduction of Windows Live Mail and the chance to get "yourname@live.com" was setting off a bit of a frenzy for e-mail addresses, reminiscent of the dot-com boom, but on a much smaller scale, Sim said. "Even the prime minister wanted to reserve his live.nl alias because he knew there would be a land grab for these new Windows Live Mail addresses," he said.

Jupiter analyst Michael Gartenberg said the phenomenon was part of a larger movement by Microsoft and its competitors to boost their mind share and market share. He describes a rush "that we haven't seen since the late '90s, where people are vying for people's attention to change their home pages and switch their e-mail clients."

Microsoft's challenge will be to differentiate its product enough so that people will prefer it over other services, Gartenberg said. "It's easy to sign up and harder to get someone to continue to use it as a primary account," he said.

With Windows Live Mail Microsoft getting back into the Web e-mail game after letting Hotmail stagnate, said David Smith of Gartner. "Ultimately, Microsoft is positioning to re-enter the space with Live," he said. "It's a critical piece of the Live services."

Meanwhile, Sim said Microsoft was shutting down a Web site that purported to offer a hack in the Windows Live Mail sign-in process so that anyone could sign up for live.com and other local Live domains.

Microsoft's competitors have been busy with their e-mail products too. Yahoo revamped Yahoo Mail last year to give it a more desktop-like feel, and this week previewed embedded instant messaging targeted for a future release. Google, meanwhile, added chat to Gmail early this year.

Microsoft's Hotmail has 20 percent of the global Web-based e-mail market, Yahoo Mail has about 18 percent and AOL and Gmail each have about four percent, according to the Radicati Group.

There are about 260 million Hotmail and Windows Live Mail users worldwide, Microsoft said.