Yahoo Boosts E-Mail Storage in Response to Gmail

Yahoo moved to quell defections from its e-mail user base yesterday by drastically increasing e-mail storage limits in response to Google's pending release of Gmail.

Yahoo Mail now gives its free Web mail users 25 times more free storage, 100 megabytes. For $19.99, Yahoo Mail Plus subscribers get 2,000 megabytes of storage, double the 1,000 megabytes Google offers for free with Gmail. Previously, Yahoo offered tiered storage upgrades costing up to $59.99 for 100 megabytes.

The move could protect Yahoo from losing many of its 141 million registered users to Google's new e-mail service, which offers increased storage and advanced search capabilities in exchange for text ads displayed next to e-mail messages. Google scans e-mail messages to match up their content with keyword advertisers.

As search engines evolve, Yahoo has noted its enormous registration base as a key differentiator from Google since it could use such demographic information to personalize search results. With Gmail and its Orkut social networking service, Google also would gain registration information.

Yahoo and Google have proceeded slowly with personalized search results, citing the need to respect users' privacy concerns. Amazon made steps in this direction with the April test release of its A9 search engine, which matches users' search history with personally identifiable information obtained through activity on the Amazon site to personalize search.

Brad Garlinghouse, Yahoo's vice president of communications products, said in a statement that the new Yahoo Mail benefits would remove storage space as a consideration when consumers choose a Web e-mail provider. Yahoo and Gmail now far outpace the storage capacities offered by the largest Web e-mail provider: MSN's Hotmail, which offers 2 megabytes of free storage.

“When they judge Web mail value, they'll continue to look at all the things that make Yahoo Mail No. 1, including privacy practices, superior spam and virus protection, and integrated calendaring and alerts,” he said.

Garlinghouse's mention of privacy practices indicates that Yahoo plans to make this issue a differentiator with Gmail, which ignited criticism from privacy groups over its message scanning and data-storage policies. Yahoo does not scan e-mail messages to display advertising, though it does scan them as part of its spam filtering, like most e-mail providers. The Sunnyvale, CA, company said its Yahoo Mail Plus users and subscribers to its DSL service offered through SBC would not see graphical ads.

Yahoo also revamped its e-mail layout and said it improved its e-mail search capability and put 50 million e-mail names back into distribution, in moves to counter potential draws to Gmail.

Google plans to release Gmail officially later this summer. The Mountain View, CA, search giant announced the service in April and gave accounts to hundreds of beta testers. Gmail since has expanded virally through Google giving existing users invitations to send to others.

Though privacy groups protested Gmail and California's legislature moved to rein in the service, many Internet users have clamored for accounts. Gmail accounts have been auctioned on eBay, and one Gmail fan set up, a site where existing Gmail users can trade invitations for offbeat services and other items, such as one day's bodyguard service in Chicago.

Research by Standard & Poor's indicated solid consumer demand for Gmail. In a poll conducted for the research firm by InsightExpress, 23 percent of adult U.S. Internet users said they were very likely or likely to try Gmail.

Yahoo's decision to offer so much more storage for free could trim the number of paying relationships it has with customers. In the past few years, Yahoo has made inroads in drawing paying subscribers through add-ons like e-mail storage, online dating and its SBC DSL service. Last quarter, it reported 5.8 million paid subscribers, double the number of a year earlier. Yahoo does not break out subscribers for its various premium services.

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