Yahoo! Gets Fat

What does it mean when Yahoo! (Nasdaq: YHOO  ) quadruples the storage of its free email accounts and agrees to acquire fast-growing photo-sharing site Flickr? In a nutshell, fat is where it's at and thin is no longer in.

With bandwidth costs getting perpetually cheaper, chunky email accounts and a digital photography site on the side are all part of a healthy diet these days. Given that Yahoo! is faring so well with its paid search text ads, it makes perfect sense for the company to widen its online properties and make them as sticky as possible.

Increasing the storage on its popular email service from 250 megs to a full gigabyte was probably going to happen anyway. Google (Nasdaq: GOOG  ) has been slow to officially roll out its Gmail service, but it threatened to be a category killer by offering a gig of capacity at a time when Yahoo! and Microsoft's (Nasdaq: MSFT  ) Hotmail were giving their free users only a few megs of storage.

It wasn't an easy upgrade decision for Yahoo! because it also sells a premium email service. Now few users will pay up for even more storage, but that's the sacrifice that Yahoo! has to make to keep up with Google these days.

Flickr is a more intriguing move. On Monday, Hewlett-Packard (NYSE: HPQ  ) announced that it was buying Snapfish. Great move. HP is trying to push its photo printing products, and in Snapfish it landed a site with 13 million registered users and 350 million uploaded snapshots. While Flickr is smaller -- just 5.5 million digital photographs -- it is what one would consider the Rule Breaker of photo-sharing sites. It's on the cutting edge, with a hip community to go along with an impressive list of features that allows its members to tweak and distribute their uploads. If Yahoo!'s current photo sharing feature can be humbly labeled vanilla, it just acquired a Neapolitan sundae.

Though Flickr may have been a more lucrative catch for a company like HP or Ofoto parent Kodak (NYSE: EK  ) , it is the viral nature of digital photography and Flickr's uncanny personality that makes this a great catch for Yahoo! as it continues to widen its online wingspan.

So yes, Yahoo! is getting fatter -- but in all the right places.

Some more stories worth talking about at your next digital photo shoot:

Longtime Fool contributor Rick Munarriz is backing Yahoo! in our Stock Madness 2005 tournament, but he does not own shares in any of the companies mentioned in this story.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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