However, in 2004, Google announced Gmail, a competitive email service that is still available for free to individual users. Gmail put a lot of pressure on Hotmail by providing more storage space, flexibility, and overall speed (as well as Yahoo Mail, another big competitor from back in the day).

In 2005, Microsoft rushed to release Windows Live Hotmail, a new version of the email system. Gmail offered numerous important benefits over Hotmail at first. The most important was that it provided 500 times the amount of storage: 1GB! Gmail also had significantly improved search and spam filtering, and it functioned more like an app than an HTML web page.