As Facebook Launches Email, Who Loses?

Facebook, by many media accounts, is set to launch its own email service. The addresses for the accounts are likely to be xxxx@facebook.com. Facebook has 500 million users worldwide -- well over 100 million of them in the U.S.

The companies that stand to lose the most if the service is popular are Google (GOOG), Microsoft (MSFT), AOL (AOL, parent company of DailyFinance) and Yahoo (YHOO), all of which have huge numbers of email subscribers. Some of the portals get a large portion of their page views, and therefore a large amount of advertising, from email accounts.

Facebook has already hurt the portals by selling ads at CPMs (cost per thousand viewers) below previously established market prices. This has tended to bring down what portals can charge in a competitive ad industry.

But Facebook's new email service has just as much chance of failing.

Email users keep the addresses of their contacts. In some cases, that may be hundreds if not thousands of addresses. To migrate these to a new service could be considered risky by some customers, even if it's not from a technological standpoint. Many people simply don't want to take a chance on the process or go through the bother. Many email users may also worry that friends and business associates won't update their contacts to reflect a new email address.

Perhaps the greatest hurdle Facebook email will encounter is concerns about privacy. The social network has -- deserved or not -- gained a reputation as a website that's willing to share information about the demographics and habits of its users. Potential customers Facebook's email may be put off by that.

Just because Facebook is Facebook doesn't mean that every service it launches will be a success.

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