Bhatia: Once you’ve got a lead in terms of a subscriber base, that is unassailable.
It can’t be replicated easily. So I knew even if they started developing the
product—I have no doubt in my mind that they could have developed it, so
many engineers and smart people in Microsoft. At that time they had something
like 16,000 engineers, and I had a total of 60 people in the company, only
14 engineers, so it would have been easy to pick 15 guys from 16,000 and build
this product. But I knew we had that momentum behind us and that is very
hard to replicate.
Livingston: You arrived in this country with only $250 in your pocket. Wasn’t it
tempting for you to agree to sell for, say, $300 million?
Bhatia: Once you have tasted this kind of success, once you’ve tasted that it
works, that you’ve got subscribers who are telling you it’s good, you know you
are going to get there. In fact, that’s exactly what’s happened. That 6-month
lead that we had already over any of our competitors today has translated into
about a 50 to 100 million–user lead.
Seeing how they did a lousy job of providing email to their 2.5 million subscribers,
I also knew that they didn’t have the technology in house. Because if
they did, they wouldn’t have been asking to license this from us. If we had gone
the licensing route, I think we would have been as big as Google. Because that’s
what Google did, right? Initially, they said, “We’ve got search. Why don’t we
license search to everyone else?” That was their original business model. They
licensed it to Yahoo, Microsoft, and AOL and grew big based on their subscribers.
Livingston: Do you wish you had gone the licensing route?
Bhatia: No, it would have been a lot more difficult, because the cost of providing
email was much higher than the cost of providing search—even though
search is far more profitable than email in terms of the advertising monetizability
of search. Because when somebody searches, they are looking to find something;
they are in the mood to click. Email is more of a destination. When you
are doing email, you don’t want to be disturbed by what’s on the right, you want
to read whatever your friend has written to you. So it’s the end product. It not a
click-through kind of a product. So I don’t know where we would have ended
up had we done that.
Livingston: Looking back on your experience with Hotmail, what surprised you
most?
Bhatia: I think I knew that Hotmail was going to become successful one day. I
was just shocked that all of that happened in a span of 20 months from start to

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