Webmail.us Acquired by Rackspace – Subscription Model Does Work

Webmail.us, a business web email service, has just been acquired by leading web hosting company Rackspace for an undisclosed sum. We last covered Webmail.us in August last year as part of an overview of the web email market. At that point Webmail.us provided email hosting services to more than 23,000 small-medium businesses. Currently, over a year later, Webmail.us provides services to more than 72,000 businesses and 600,000 users. Also recently Webmail.us made the Inc 500 list as the #217 fastest growing private company in America.

Webmail.us already had a successful partnership with Rackspace – their entire email hosting infrastructure is hosted by Rackspace and Rackspace is their largest reseller. CEO Pat Matthews has a post about the sale, noting that “the market is really going to open up, leaders are going to emerge, and followers are going to fall behind.” He said that Webmail.us decided to sell to “make sure we’re positioned to be the leader in our space” (which is business web mail).

In November last year we wrote about Webmail.us as one of the most compelling success stories for Amazon Web Service– it uses Amazon S3, The Simple Queue Service and the Elastic Compute cloud to run its operation. Probably the best thing about Webmail.us though, in my high level view, is that it’s a great example of a web 2.0 startup which earns good revenues via a subscription based business model. CEO Pat Matthews, who I met at the 2005 Web 2.0 Conference (and Webmail.us was also one of Read/WriteWeb’s very first sponsors, back in mid-2005), made the following comment in October 2005 to a post that questioned the sustainability of web 2.0:

“Companies like mine (Webmail.us), Typepad, 37 Signals and even Salesforce.com all do charge customers a monthly or yearly fee for services. In my opinion, this is the soundest model although in many cases it presents challenges with the exponential user base growth some of the free companies experience. But I think most of the companies I just mentioned are indeed trying to build businesses, not features to flip.”

Of course, Webmail.us has just been “flipped” in October 2007 – but it’s taken 2-3 years of slow but steady user and revenue growth. So in many ways Webmail.us is a web 2.0 success story, even though not at the scale of a Zimbra or JotSpot. Congratulations to Pat and team for a job well done.

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