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Yahoo Expands E-Mail Storage, in Nod to Google
Tuesday, June 15, 2004
Yahoo will substantially increase the amount of free storage it
gives its e-mail customers, in an effort to respond to Google's
incursion into e-mail services.
For Yahoo, defending its e-mail business is crucial to competing
against Google, which has become the leading Web search engine.
While free e-mail accounts have display advertising, they are not
especially profitable. But they are an important way to build customer
loyalty and to direct users to other, more lucrative sections of
an Internet service. People spend more time reading their e-mail
than doing anything else online.
Google is testing a service, called Gmail, that offers users one
gigabyte of storage on its servers - enough that most users will
never have to delete a message. The service, currently available
by invitation only, is free, but the side of the screen displays
advertisements related to the content of a user's e-mail messages,
a feature that has drawn the attention of groups concerned about
privacy.
Starting today, Yahoo will offer users of its free e-mail service
100 megabytes of storage. That is one-tenth of what Google offers
but is still far more than the four megabytes Yahoo previously offered.
It will also introduce a premium e-mail service, called Yahoo Mail
Plus, with two gigabytes of storage for $19.99 a year.
"We are taking storage off the table as an issue," said
Brad Garlinghouse, Yahoo's vice president for communications products.
Yahoo Mail Plus has a few other features Google does not offer;
most significantly, it lets users download their mail into Microsoft
Outlook or other software programs.
Yahoo is also introducing several other e-mail features and improving
the function that searches for text in messages, a feature that
Google has made central to Gmail.
Mr. Garlinghouse said that people might continue to choose Yahoo's
e-mail service, in part because it was integrated into other Yahoo
offerings like its address book, appointment calendar and photo
sharing services.
Yahoo and Hotmail, from Microsoft, are by far the leading e-mail
services. A spokeswoman for Microsoft said the company was exploring
higher storage limits but was not prepared to discuss details.
Gmail is especially important for Google, which is trying to broaden
its business beyond its successful Web search service. E-mail is
not only popular; it requires users to identify themselves. Once
they do, Google could pick advertisements for them based on their
location or other attributes.
A spokesman for Google declined to comment on Yahoo's new offering,
citing rules related to its pending public stock offering. In the
past, the company has said that it is exploring other features for
Gmail.
Despite the privacy questions, many users have eagerly anticipated
Gmail, with initial test accounts being sold on eBay for as much
as $60 each. The service is expected to be available to the public
later this year.
Yahoo says its terms of service do not allow it to use the text
of e-mail messages to select which ads to show users. But Yahoo's
e-mail and other services do consider users' demographic and behavioral
information, including ZIP codes and what Yahoo services they use,
in choosing ads.
Mr. Garlinghouse would not say whether he thought Google's reliance
on e-mail content did, in fact, violate a users' privacy.
He said Yahoo wanted to be sensitive to privacy concerns, but he
declined to say if the company would ever consider choosing ads
on the basis of e-mail text.
Such ads might be a significant source of revenue; already, marketers
are willing to pay more for advertising matched to Web search queries.
Google and Yahoo, which are paid each time a user clicks on those
ads, are increasingly looking for new places to put them.
Charlene Li, an analyst with the Internet marketing firm Forrester
Research, said she did not think Yahoo would sacrifice much revenue
by forgoing ads linked to e-mail content, because she thought companies
would find e-mail services less effective than search pages for
advertising.
"When you are reading your e-mail, you are focused on that
task and will ignore the ads," Ms. Li said.
Yahoo's increased storage calls into question its longstanding
business of selling larger mailboxes to its users. Its prices have
ranged from $9.99 a year for a 10-megabyte mailbox, to $49.99 a
year for 100 megabytes, the size it now offers free. Customers of
the services will be converted to Yahoo's new two-gigabyte Plus
service. Customers who are content with the 100-megabyte free account
will be able to request refunds.
Mr. Garlinghouse said that the expense of the additional storage
and the potential loss of premium customers would not have a material
effect on Yahoo's profits.
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