R.I.P. Hotmail: Microsoft Is Moving On

Microsoft (NASDAQ:MSFT) will phase out Hotmail and introduce a new web-based e-mail service under its Outlook brand. While the new service will be free, Microsoft is hoping to use the brand value of its highly successful corporate e-mail service, which is sold along with the Office suite. A preview of the new service will launch on Tuesday. Hotmail, which has lost massive ground to Google’s (NASDAQ:GOOG) Gmail and Yahoo (NASDAQ:YHOO) Mail over the last few months, will be phased out by next year.

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The new Outlook.com will let users sort incoming e-mail by types of messages, for instance those that are just social media update notifications or subscriptions like those of Groupon (NASDAQ:GRPN). It will also integrate with Facebook (NASDAQ:FB) and Twitter, including facilitating Facebook chat sessions within the e-mail window. Eventually it will also incorporate Skype video chat capability. The service is also designed to allow easy use of Microsoft’s other Internet products, such as SkyDrive storage and Office Web Apps.

Brian Hall, a general manager in Microsoft’s Windows group, told Bloomberg that the new portal will have a clean design and include less obtrusive advertising.

“E-mail is one of the only areas in technology that’s gone eight years without a significant change — the last big move was the release of Gmail — and for us it’s maybe been even longer than that since our last big change,” Hall said. “None of the social networks existed then, and the types of e-mail we get have changed.”

According to ComScore, Hotmail has lost 4 percent unique visitors globally this year through June, while Yahoo Mail gained 2 percent and Gmail increased 17 percent. Hotmail, which Microsoft has owned since 1997, still remains the world’s largest e-mail service with 324 million users.

Microsoft will encourage existing Hotmail users to convert to the new Outlook service by helping transfer their messages and contacts easily. It will also let them keep their addresses ending in @hotmail.com, though it will eventually move all users to the new site.

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