Microsoft reboots Hotmail to build consumer destination, says analyst

Integration with SkyDrive, Office Web Apps crucial to strategy

Microsoft's rebranding of Hotmail as is a move by the company to hold its first-place position in free email while pushing the domain as more of a consumer destination, an analyst said today.

Earlier today, Microsoft unveiled, a massive overhaul of Hotmail that features a visual redesign, integration with the SkyDrive cloud-based storage service and free online Office apps, and ties with several social networking sites, from Facebook and Twitter to LinkedIn.

While Microsoft will run Hotmail and side-by-side for an indefinite period, eventually the company will ditch the former, the company said today.

Wes Miller, an analyst with Directions on Microsoft, a Kirkland, Wash.-based research firm that only tracks Microsoft's moves, said the shift to illustrates Microsoft's recent focus on consumers. "They're trying to harmonize the value of Hotmail and the Metro design language with the services they already provide," said Miller. "They want to make Hotmail become more of a destination, a place where users spend more time.", like Hotmail and other free email services such as Google's Gmail, runs advertisements within its browser-based interface. The more time users spend on, the more ads Microsoft can show them.

But Microsoft isn't trying to make "stickier" -- a term that describes websites that not only attract users, but keep them there -- using its social media ties.

"I'm not so sure that [social networking] will be the thing that drives people to it, or to use it," said Miller of "Instead, it will more about how [the service] helps you get things done."

Miller pointed to the integration with SkyDrive and the Office Web Apps -- the in-the-cloud versions of Excel, PowerPoint, OneNote and Word -- as key to Microsoft's strategy. provides each user with a free SkyDrive allotment of 7GB, and will open Excel, PowerPoint and Word documents with the online apps. SkyDrive is particularly critical to, as file attachments, including those sent by others, are deposited in the cloud, allowing users to send and receive very large files that might choke an email server or be rejected because of size limitations. image's ties with Office Web Apps lets users open Excel, PowerPoint and Word documents even if they don't have a copy of Office handy. (Image: Microsoft.)

Microsoft's used the Hotmail brand since 1997, when it acquired the service for an estimated $400 million. But the brand is old, said Miller, while others have said the service lacks the panache of Gmail among the technology elite.

"Hotmail feels dated, it looks like a Honda from the 1990s," said Miller. But the service, while perceived as old-fashioned, continues to be a major Microsoft success: According to recent data from measurement company comScore, Hotmail led the market with 324 million unique visitors last month, compared to 290 million for Yahoo Mail and Gmail's 277 million.

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