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Google + e-mail = gmail
No. 1 Web search firm will launch e-mail service (no kidding) in latest salvo against Yahoo and MSN.
April 1, 2004: 1:09 PM EST

MOUNTAIN VIEW, Calif. (CNN/Money) - Google Inc., the world's No. 1 Internet search provider, plans to begin testing a free search-based e-mail product called Gmail, as it battles rivals Yahoo Inc. and Microsoft Corp.'s MSN.

The new service, which begins testing on Thursday, will automatically organize e-mail according to topic and allow users to search all their e-mail -- including sender, text and subject lines -- in the same way they search the Web, Wayne Rosing, Google's vice president of engineering, said Wednesday. (See more information at

Mountain View, Calif.-based Google also will provide one gigabyte of storage to free account holders, far more than that offered by Yahoo and Microsoft's (MSFT: Research, Estimates) Internet unit, MSN, which each built strong user bases around free e-mail services and have been attacking Google's prominence as a Web search provider.

However, Google's one gigabyte of storage claim led to some speculation about the Gmail announcement being a hoax since it took place on April Fool's Day. Google has pulled April Fool's jokes on the tech community before, including jokes about pigeons being the driving force behind Google's search technology and that Google was looking to start a new research center on the moon.

In addition, the press release about Gmail was fairly goofy, including lines such as "Millions of M&Ms later, Gmail was born." For a look at the full press release, click here.

But Jonathan Rosenberg, vice president of the products group at Google, said the Gmail announcement was legitimate. He did concede that the company did get caught up in the spirit of April Fool's Day in its press release.

Google is widely expected to sell shares in an initial public offering later this year, and some in Silicon Valley had predicted the company would roll out an e-mail service to challenge Yahoo Mail and MSN's Hotmail.

"We want to organize and present all the world's information," Rosing said, who added that the service will be formally launched in "weeks to months."

Rosing said the company has no active plans to add Gmail to the main page, as it has done with previous test programs like News and Froogle, its price-comparison shopping tool.

While Google is not likely to roll out exactly the same offerings as Yahoo (YHOO: Research, Estimates) and MSN, the world's top two Internet portals, it will be fighting them for the hearts and minds of the same users, said Piper Jaffray analyst Safa Rashtchy.

"Google is now a full-fledged competitor in the portal war," he said, adding Gmail "introduces a new round of competition in the e-mail space."

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Google has raised the stakes by adding new technology beyond run-of-the-mill anti-spam software, and has turned up the heat with its free storage offer, he said.

Yahoo, for example, offers four megabytes of free storage and has a premium e-mail service that gives users 100 megabytes for around $50 per year.

Put in real-world terms, Gmail's one gigabyte of free storage could hold the equivalent of a pick-up truck filled with books, where Yahoo's four free megabytes could not quite handle the complete works of William Shakespeare.

The biggest challenge will be convincing users to switch away from the e-mail address where friends, colleagues and family know to reach them, Rashtchy said.

"E-mail is highly, highly sticky. You want to be where your friends are. You don't want to change your e-mail," he said.

Analysts called Gmail a multi-front attack.

Not only does it give Google another venue to further expand its lucrative key-word advertising services, it likely will help hasten its quest to offer more personalized search results -- also a top priority at Yahoo and MSN.

"E-mail is the killer (application) for getting people to share information," said Gary Stein, senior analyst at Jupiter Research. Search providers say such personal data is key to providing users with search results that more closely match the information they seek.

Further, analysts said, Gmail takes Google's war to Yahoo and MSN's backyards.

"It's the march of Google toward being a destination," Stein said, echoing a widely held view that the company is moving closer to being an Internet portal with a full range of products and services from e-mail to online shopping.

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