Making Gmail Work

Google has a big problem on its hands: Gmail users are developing ad blindness. Ad blindness results when people get accustomed to ads and stop noticing them. Ad blindness is not a problem for search engines, as people are searching for information and very often text ads constitute relevant information. Gmail ads can be relevant as well, but they have a much lesser probability of being so. Consequently, people have a lot less incentive to read them, and eventually learn to ignore them without conscious effort.

Unfortunately, Google can't afford to have Gmail users develop ad blindness. If Gmail users develop ad blindness, Gmail's business model will degrade to one of Hotmail's or Yahoo Mail's. It simply won't matter that Gmail's ads are better targeted than those of Hotmail's or Yahoo Mail's. This will be a big disaster as Microsoft and Yahoo have never exactly overflowed with webmail profits. Worse, Google will have the additional burden of picking up the tab for 1 GB quotas and the multiple Gmail accounts people have signed up for.

Google is attempting to fight ad blindness by putting user-interface elements in the same space as the text-ads, but this is unlikely to be effective. Google can experiment with different ad formats, color changes, etc., but these too will prove ineffective in the long-term. People tend to notice the changes when they are first initiated, but eventually revert to ad blind behavior. The only real solution to this problem is to provide incentives that motivate people to read ads.

What kind of incentives might work? How about displaying ads that promise users $500 for clicking them? If such ads were indistinguishable from regular ads and appeared frequently, no doubt, most Gmail users will start reading text ads. Of course, if Google started such a program, the company will rather quickly find itself out of business.

Google needs to offer incentives that don't cost much to Google, but still compel Gmail users to read ads. Google doesn't have too many choices here. In fact, it only has one obvious choice: storage quotas. Gmail became all the rage primarily because of storage quotas and if Google dangles the lure of enhanced storage quotas, Gmail users will start paying attention to ads.

Storage costs are declining all the time, Google can easily dole out 500 MB of additional storage space every year to Gmail users who read ads. Google can use this 500 MB quota to make the text ads section of Gmail behave like a slot machine. Every once in a while a text ad will appear in the ad section which will add some small chunk to the user's quota if clicked. People must not know when such an ad is going to appear and they must not know how much they are going to get. Occasionally, Google can distribute a few outrageous (1-10 Terabyte) quota chunks, and that will create a nice buzz around Gmail. Psychologists call this variable schedule reinforcement, and it works really well.

Google will still need to solve the problem of people signing up for multiple accounts. Obviously, it is much easier to simply sign-up for an additional Gmail account instead of reading text ads for two years. To solve this problem Google can distribute bonus points in addition to the quotas. Under this scheme, users get one Google Point for every megabyte of additional quota they accumulate. Once users have accumulated enough Google Points they can exchange them for Gmail account enhancements. Now the solution to the multiple account problem is really simply: add a nice interface for storing files to Gmail and charge 250 Google Points for access to the interface.

This file upload/download interface will have the added benefit of creating demand for bigger quotas, and this will make the quota ads all the more valuable. Additionally, Google can tie the maximum file size that can be stored in a Gmail account to a percentage of the additional quota a user has accumulated; ten percent will likely do very well.

Google can offer all sorts of additional Gmail account enhancements in exchange for Google Points. For instance, Google could offer Bayesian spam filtering for 150 Google Points. Bayesian filtering is somewhat expensive to implement as it requires the storage of account specific filter data. Google will be offering the feature to its best customers so the additional expense will be acceptable. Google could have done something similar with POP access, and probably still can as Gmail is still in Beta.

The idea of distributing Google Points in addition to quota chunks seems redundant. Why not simply distribute Google Points, and let people purchase quotas if they so choose? The problem here is that Google Points will need to be accumulated before they can be exchanged for account enhancements. Consequently, there will not be any instant gratification associated with them. The instant gratification of immediately available additional storage is essential to keeping users interested in any such scheme.

If Google manages to create a successful rewards program based on these ideas, it might even be able to launch a premium version of Gmail. There will be nice synergy between premium Gmail and the rewards program. The rewards program will act as advertising and demo for premium Gmail. Users who get sick collecting Google Points can opt for premium Gmail, and many will likely do.

Of course, some people don't care about additional quotas and account enhancements, what can Google do about them? Well, people who don't care about quotas are likely not using much storage, and people who don't care about account enhancements are likely not using Gmail much. Obviously, these types of users are not costing Google anything. It would be great if Google could make some money from these people as well, but if it can't, this is nothing awful.

Google also needs to watch out for competitors. Ad blindness is a problem for Yahoo Mail and Hotmail as well. Most likely these webmail services are contemplating switching to Gmail's business model, and the above idea makes as much sense for them as it does for Gmail. Actually, they have the advantage of being able to give out larger quota chunks as their base quotas are only a fraction of Gmail's. It would have been nice, if Google had a business process patent on some implementation of this idea, but it is sort of late for that now.

by Usman Latif  [Mar 02, 2005]

Updated: Mar 05, 2005

Will Plain-Text Ads Continue to Rule?
The Webmail Wars