Microsoft sweeps out Hotmail accounts

In Microsoft's popular free e-mail service, messages are being swept out and bounced back to senders as the site urges members to upgrade to a premium version that costs $19.95 a year, according to subscribers.

One Hotmail user, Arianna, said she signed on to her e-mail account last week to find the system had emptied out her in-box--including important messages about her upcoming wedding--but left her junk-mail folder full.

"It definitely felt like strong-arming, like 'See what can happen if you don't pay us,'" said Arianna, a community college professor who lives in San Francisco.

Long the reigning free program for Web-based e-mail with more than 110 million users, Hotmail has made several policy changes to the service in the last nine months that add up to a big push for paid membership. Such moves could rebuild free e-mail services including Hotmail and Yahoo Mail as the next tollbooths for Net consumers, even though many Web surfers signed up for e-mail accounts early on thinking that they would be free for life.

More broadly, Microsoft is eager to increase adoption of its various Internet services including Hotmail and wallet software Passport as part of its .Net strategy--an overarching effort to connect all of its online properties and products using a common set of Internet technologies and Microsoft software.

Since Microsoft's $400 million acquisition of Hotmail in January 1998, the company has maintained its heritage as a popular free online service despite dramatic changes in the Internet economy. But as Microsoft has started to introduce .Net--which also serves to push subscription revenues--the company is increasingly urging people to spend money with its services.

"It all has to do with the .Net strategy of driving as much adoption on the consumer side and eventually as much revenue as possible," said Matthew Berk, analyst at Internet research company Jupiter Media Metrix. "In addition to Hotmail, Microsoft is enforcing use of Passport." Passport and Hotmail accounts are linked by the same registration.

Ratcheting up the rules
Last fall, the company became strict with part-time Hotmail users by saying it would dump accounts of anyone who didn't log on at least once a month. This was a change from its previous 45-day policy.

Then in the summer, Hotmail introduced its first-ever fee of $12.95 a year for additional mail storage over its free 2MB, which typically holds up to 200 pieces of e-mail without attachments. It increased the charge to $19.95 in late December. The paid service allows subscribers to maintain an account without ever logging on. Hotmail has also told free subscribers that if their storage limit is exceeded, it will bounce incoming messages or mailboxes will be cleared.

Meanwhile, the crush of unsolicited commercial e-mail, or spam, to many subscriber mailboxes is pushing the storage limits. Consumers who use Hotmail's spam filters, introduced last year, say they are still receiving an enormous amount of junk--enough to force regular visits just to delete spam so they can stay under the storage limit.

Microsoft said that consumers will receive an alert when their in-box reaches 1.8MB, just near the limit. "Once the 2MB limit is reached users can read and delete e-mail, but e-mail being sent to the account will bounce back and the account holder will not be able to send mail until more space is created by deleting some of the e-mail or signing up for MSN Extra Storage," said a Microsoft representative.

The representative said that Hotmail regularly empties old e-mail for customers, first cleaning out trash folders then junk-mail folders. In-boxes are emptied third, then "personal" and "sent" folders. The representative said it is a mistake if an in-box is cleared out first.

Within its alert messages, Hotmail promotes its premium account, with 10MB of storeroom for Hotmail and 30MB for storing files on MSN communities.

Some subscribers say that pushing the boundaries gets them regular attention from Hotmail.

"It seems like every time I check, there's a message saying my file-size limit is being reached and I should upgrade," said Dave Crowley, a Hotmail user. "I could be wrong, but I think that's becoming a standard daily spam message."

Moreover, some consumers say they suspect that Hotmail has unleashed junk mail from third parties to purposely overload mailboxes and drive subscriptions.

One Hotmail user said he received an e-mail from the service in the last month saying that if he exceeded the storage limit, his incoming messages will be blocked with no explanation to the sender.

"The day after that announcement, my junk-mail folder had suddenly been spammed with the same message at least a hundred times, putting me over the storage limit. This kind of spam never hit me before and has happened a few times since," said Hotmail user Steve Rowley.

In response to such claims, Microsoft said it is "vigilant" in providing Hotmail users with tools to protect them from spam.

Everyone's doing it
Microsoft isn't the only company on a campaign to drive subscriptions. Hotmail competitors including Terra Lycos and Yahoo are determined to make inroads to consumers' pocketbooks. For example, Yahoo said Thursday that it would start charging for an e-mail forwarding service. Yahoo also sends regular messages about exceeding storage limits and upgrading to paid services.

"To what extent is anyone capable of truly supporting the scale of (Hotmail and other popular e-mail communities) for free?" asked Jupiter's Berk. "It's a multiple-pronged strategy: Initially, you try to get as much usage as possible, and eventually you take the steps of charging for services."

For Microsoft in particular, Berk believes that by urging adoption of Hotmail and Passport, in the long term it will have better chances of pushing transactions through its .Net system. Hotmail is just one service among many that encourages consumer adoption of .Net-based services, he said, listing MSN Communities and bCentral.

To address some of the spam issues, Hotmail is in talks to start using additional filters from software company Brightmail, which provides spam protection to MSN's Internet access service. According to Brightmail, Microsoft is planning to start using the filters in the near term. The software giant would not comment on its plans.

Last July, Hotmail upgraded its spam filters to make them easier for consumers to manage. The filters let consumers block by senders' addresses or choose a range of settings for receiving junk mail. People can also set the service to only accept mail from certain domains.

Consumers can also tell Hotmail to regularly clear out the junk-mail folder every seven days or immediately dump mail that appears to be spam. But consumers say the filters have progressively proved ineffective.

Arianna said that because she's not on the computer every day, her spam intake is outpacing the seven-day janitor service. She and other Hotmail users say they have their filters adjusted to the strictest filter setting but still get overloaded with junk.

Despite her longtime use of the service, Arianna said she's questioning her loyalty in light of the recent problems.

"The thing that's so frustrating is that it just wasn't ever that close (to the storage limit), and they deleted my in-box and not my junk box," she said. "MSN is all about money. This just stood out to me as a glaring example that they're more interested in seeing their advertisers connect with me."