One of the first web-based email systems, called "HoTMail" originally, was launched in July 1996 by Sabeer Bhatia and Jack Smith with an initial seed investment of US$300,000. Growth was very slow at the start as they were focused on conventional marketing strategies such as buying billboards and radio ads. |
A few weeks after launch, they discovered a key insight: 80 percent of signups actually came from friend referrals. Tim Draper, one of their seed investors, then came up with an idea of putting a message at the bottom of every email sent using Hotmail - 'PS: I love you. Get your free e-mail at Hotmail'
Bhatia at first feared that doing this would be unethical but finally agreed to do it but without "P.S. I Love You" part. The impact was almost instant - the growth curve took the shape of a hockey stick. They then started averaging 3,000 new users per day.
Fast forward six months, they reached the one million users mark, with two million users five weeks later. It was VERY viral. At one point, Bhatia sent a message using Hotmail to a friend in India and three weeks later Hotmail had registered 100,000 users there.
They had 12 million users in 18 months of inception (keep in mind that there were only 70 million Internet users at the time). Microsoft subsequently acquired the company for an alleged $400 million.
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