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Jonathan Rosenberg, Google's vice president of products is reported as saying that Gmail 'is not a hoax'.

The announcement has been seen as taking the battle to Yahoo and Microsoft. Both companies have set their sights on taking the search engine crown from Google and who also have thriving businesses with free email: Yahoo with some 52 million subscribers and Microsoft Hotmail with 45 million. The big selling point for Google is the 1GB of storage space compared with say the 4MB of Yahoo Mail.

Although on the face of it, it sounds mind boggling that Google can see itself with say 30 million subscribers each with a bulging mailbox of 1GB, this is unlikely to be the case for some considerable time by which time storage costs will have come down - at least that is what Google is counting on. Also, while many Hotmail and Yahoo users complain about the limited storage on their free accounts, in truth very few people will be wanting to store anything like 1GB in the short term and probably 20-30MB is more likely to be the norm.

More troubling for many is the thought of Google 'reading' your email and placing contextual ads around them - they won't be embedded in the email itself like a signature. At least not yet anyway. To be honest though, ISPs already 'read' emails as part of the spam filtering process, so in effect there is little difference. However, the perception that their email is being read may put off some users.

The perception of Google as Big Brother is likely to be biggest threat to the success of the service - assuming Google has tied up all the relevant patents and other IP claims. In theory, the Google cookie can not only store your search habits, your geographical location, it could even work out how much you spend online through tracking invoices.

A whole new industry is about to spring up around the idea of contextual

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ads alongside emails. Advertisers and their new generation of "Email Optimisers" will think long and hard about which words are mostly likely to pop up in emails and bid on the likeliest keywords. Most troubling for email marketers is what happens when you send an email to a subscriber offering a service? Will a competitor's ad pop up alongside your message?

That said - and it's impossible to say at this stage - these ads are likely to have a poorer click through rate than average as readers won't really be in a buying/researching frame of mind when looking at the email. But that never stopped the spammers.

And of course, Gmail could offer all kinds of opportunites for spammers. While Google has assured potential subscribers that the service will offer spam filters, the chance to send bigger emails with embedded video which may be simply ignored rather than deleted and allowed to lurk forever and perhaps pop again under some future search is likely to be irresistible to spammers.

As with its entry into the search business, Google is about to transform the web based email industry. Executives at Yahoo and MSN will be hurrying back to their business plans and come up with a response even at the cost of reduced margins as their 'premium' extra storage email services suddenly look like a weak joke.

These companies will want to respond soon as they will want to take as much wind out of Gmail's sails as they can with their rival offerings before it steals the market. That said, there is unlikely to be a mass migration from Yahoo and Hotmail users to Gmail as many casual users are satisfied with their existing accounts and anyway it's too much of a pain to inform everyone of a change of email address. What they won't want though is to be seen to be laggards in the forthcoming three-way battle for searchers.

Also likely to be damaged is the online storage industry, who just saw their entire business model blown out of the water unless they can top the 1Gb Google offer.

By stepping outside its core search engine business into the area of 'user services' in such a dramatic fashion will do the company no harm at all as it limbers up for an IPO. The fact that the announcement was made on 1 April and set the web alight over whether or not it is true will also be seen as a bit of PR genius on their part. We here were proud to be part of it. For sure, the sleepy backwater that was web-based mail has suddenly been transformed.