I feel like it's 1997 all over again: Google to offer gigabyte of free e-mail | CNET News.com
The interesting thing here is that I think Google can make it work... and well. Let's face it, their advertising engines are so well tuned, that they must be making money off of every page view. Once that happens, the calculation is pretty simple:
Estimated advertising revenue - Estimated cost to present pages > 0 ? Yes = Do it.
Essentially, giving people an account with a gigabyte of mail that they check 5 times a day (or whatever) is cheaper per account than they'll make on their advertising. It's nice when economies of scale really get moving. Google is so efficient at running very large amounts of machines that they can basically handle as many machines as necessary in their datacenters. What's next, Geocities.google.com?