Enlarge / The many lives of Hotmail. (credit: Sean Gallagher)

Twenty years ago this week—on December 29, 1997— Bill Gates bought Microsoft a $450 million late Christmas present: a Sunnyvale-based outfit called Hotmail. With the buy—the largest all-cash Internet startup purchase of its day—Microsoft plunged into the nascent world of web-based email.

Originally launched in 1996 by Jack Smith and Sabeer Bhatia as "HoTMaiL" (referencing HTML, the language of the World Wide Web), Hotmail was initially folded into Microsoft's MSN online service. Mistakes were made. Many dollars were spent. Branding was changed. Spam became legion. Many, many horrendous email signatures were spawned.

But over the years that followed, Hotmail would set the course for all the web-based email offerings that followed, launching the era of mass-consumer, free email services. Along the way, Hotmail drove changes in Windows itself (particularly in what would become Windows Server) that would lay the groundwork for the operating system to make its push into the data center. And the e-mail service would be Microsoft's first step toward what is now the Azure cloud.

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