Google to Offer Free E-Mail With Paid Listings

Google forged ahead with expansion plans yesterday with the news that it would release a free, Web-based e-mail system to compete with those from Yahoo and Microsoft and potentially greatly expand the reach of its paid listings.

The e-mail system, called Gmail, combines Google's search technology with an Internet e-mail service. Gmail organizes e-mail by topic and lets users search for e-mails similarly to using Google's search engine. Gmail users will not need to use files to organize their e-mail.

“The reason we wanted to develop Gmail is Google is an information company,” said Susan Wojcicki, director of product management at Google. “We're about finding and organizing the world's information.”

Wojcicki said Google had no timetable for a general release of Gmail. “Our goal would be to make it available as quickly as possible,” she said.

Google's quirky press release about Gmail, and its history of April Fools' Day pranks, ignited widespread rumors that the announcement was a hoax. Company representatives insisted it was not, and the press release was meant as its own tribute to April Fools' Day.

By branching into e-mail, Google would more clearly set itself up as a rival to Yahoo and MSN. Though it insists it is not a portal, Google has used search to branch into various areas, from news to e-commerce to social networking.

E-mail gives Google entry into the No. 1 Internet activity, performed by 93 percent of Internet users, the Pew Internet and American Life Project said in December. Search was the No. 2 activity at 83 percent.

Unlike Yahoo's free e-mail and MSN's Hotmail, Gmail will allow ample storage space, up to 1 gigabyte of storage. Yahoo Mail allows 4 megabytes of free storage; Hotmail offers 2 megabytes for free.

Though the e-mail service will be free, Google will use it to display both related Web search and paid advertiser listings next to e-mail messages.

Wojcicki said Google's AdSense listings would be displayed while users read their e-mail. Google will use its search technology to crawl an e-mail message and match it up with relevant terms. Hypothetically, a Gmail user could be reading a message from a friend about the Philadelphia Eagles and find text links offering tickets and merchandise.

Google said human editors would never read e-mails, and e-mail information would never be shared with advertisers. Google would use only text ads on the Web pages, not banners or pop-ups.

By including paid listings on e-mail pages, Google would greatly expand the available inventory for its AdSense listings, which are displayed on thousands of content Web sites.

“It could be really, really valuable inventory,” said Gary Stein, an analyst with Jupiter Research. “It could be really targeted because it's in a conversation.”

With its contextual ad inventory expanding, Google announced it would introduce a new system to adjust for listings that do not perform as well. Called Smart Pricing, Google will adjust the cost per click for listings that it finds do not perform as well as others placed in different inventory.

“It means advertisers should see some reduction in the CPCs that they're paying for content” listings, Wojcicki said.

Google has come under some criticism for having a single auction for both search and contextual listings. Many advertisers complain that the two types of listings perform differently, with contextual listings often performing worse.

Wojcicki said Smart Pricing would address those concerns while maintaining the simplicity of the single auction.

“The advertiser needs to do nothing new,” Wojcicki said. “We didn't want to ask the advertiser to learn a new bidding system. It's just a way of adjusting prices correctly.”

Google will use information it gathers through its conversion-tracking tool, a free piece of technology advertisers can use to track how their Google listings convert.

Google boasted Gmail would offer top-notch spam-filtering services, including a report-spam button that will help it identify and stop unwanted e-mail before it arrives in a user's in-box.

Gmail will be available in English only initially, then rolled out to other languages.

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