He got GMail wrong, too. Yahoo Mail is/was not "perfectly good". Yahoo Mail was pretty poor. Slow, packed with blinking ads, lacking important features, poor spam filtering, etc.

GMail won because it was a superior product. The storage was a marketing tactic - the limits Yahoo had were low, but not that low. GMail wasn't even free at first - I paid $6 for my account to some guy on eBay, and would've happily paid Google for it.

How much were Yahoo/Hotmail making from premium webmail? Not that much, I would guess, and it seems inevitable that charging for something so paltry was going to last anyway.