• by Gavin O'Malley  @mp_gavin, June 7, 2005

As part of its efforts to reach an online audience beyond its subscription base, America Online Monday debuted free e-mail with nearly limitless storage for AOL Instant Messenger users. Dubbed AIM Mail, the service is part of an updated version of the AIM 5.9 software, which enables users to access their e-mail with a single click and use their screen name as the e-mail address. AOL also announced its plans to begin offering unlimited e-mail storage for regular AOL subscribers before the end of the summer.

Along with the updated AIM, users can have up to 400 entries in their Buddy List, and can store more contact information on each one.

Each of its rivals, including Yahoo! and Google, have boosted their free e-mail storage capacity over the past year as one ploy among many to attract users. Yahoo! enlarged the size of its users' mail storage spaces from 250 megabytes to one gigabyte in late April, and Google offered up one gigabyte of free storage to users of its Gmail service last spring.

Microsoft's MSN Hotmail still limits free storage on its accounts to 250 megabytes, while Yahoo! and MSN both offer two gigabytes of storage to users who pay some $20 a year for the premium service.

Neither the competing portals or interested analysts have explained exactly what an average Web surfer is going to do with 1 to 2 gigabytes of e-mail storage, but that oversight has done little to slow the game of one-upmanship. "That's most likely more storage than anybody needs, so the marketing element here is big," Greg Sterling, analyst at the Kelsey Group, reasoned.

But there are practical reasons to push an impractical amount of storage, said Sterling. "As I understand it, the cost of storage has come way, way down over the past year, and e-mail is certainly a hook into other services," he said. "These companies are very conscious of the inertia surrounding e-mail use, because of the trouble people have to go to if they want to switch providers."

Sanjeev Aggarwal, an analyst at Yankee Group, attributed the decreased cost of storage to the arrival of serial ATA disks, which have driven down the cost of one gigabyte of storage from $5 to 50 cents from a year ago.

AOL launched a beta version of its Instant Messenger service with free, ad-supported e-mail in mid-March. The new version, which replaced a May 2 beta edition, allows AIM users to sign up for an e-mail address--their screen name at AIM.com--during the installation process.

Ads on the service, offered to every AIM member, will be from members of the AOL advertising network, such as the Sylvan Learning Center, 1800flowers.com, and ShareBuilder.com. Similar ads also appear on the AOL Webmail service used by paying AOL subscribers, but are placed at the bottom of the screen, whereas ads served into the free e-mail service are placed more prominently at the top.

AIM Mail uses technology from Mailblocks, which AOL acquired last year. The company said AIM's 22 million users will be asked if they want to activate their e-mail accounts through the upgrade.

Looking to the imminent future, AOL also said Monday that sometime this summer it plans to begin offering unlimited e-mail storage for regular AOL subscribers. AOL's nearly 80 million e-mail account holders will be able to save and store an unlimited number of e-mails, attachments, and folders on AOL's servers, the company said in a statement.