When archrivals take aim at each other, oftentimes, the consumer wins. This is true again, since Yahoo! (NASDAQ:YHOO) revealed at a meeting late last week that it will up the ante in terms of how much storage it offers to users of its free email service before it's considered a "premium" (read: paying) service.
As you recall, Google caused an April Fool's Day stir when it said that it is testing its own free email service, Gmail, which offers a gigabyte of storage as well as targeted ads that caused some privacy issues. (I still stand by my opinion that the privacy arguments were overblown -- talk about feeling alone, until Foolish colleague Rick Munarriz hit on several other reasons not to get all bent out of shape about Gmail.)
Well, now Yahoo! -- which, until now, only offered four to six megabytes of storage space to its users for free before upselling a premium service -- has sweetened the deal by offering 100 megabytes of space free of charge, which it plans to implement this summer. (For anyone who thinks that Yahoo!'s Web-based email platform is so much less "evil" than Google's, a Foolish reader reminded me of yet another aspect: Both Yahoo! and Hotmail also scan incoming emails via machine, scanning for viruses and spam.)
It's an aggressive move for a company that not only feels the heat from Google, but also faces intense competition from Microsoft's (NASDAQ:MSFT) MSN service which includes Hotmail, Time Warner's (NYSE:TWX) America Online, and of course, loads of ISPs like EarthLink (NASDAQ:ELNK). If Yahoo! makes the move to offer more free storage space, it's a pretty good bet that Microsoft's Hotmail will soon have the same feature.
It may make things a little tougher for Yahoo! While the Internet company has had outstanding fortunes lately, it's banking on the revenue potential of funneling more paying subscribers for its premium services, and email storage was one of those value-added services. On the other hand, it obviously can't afford a significant defection from its mail, if enough users are convinced that despite the targeted advertising, Gmail's gigantic storage is an offer they can't refuse.
This couldn't come at a better time for users, considering the increasing sophistication of the Internet and the copious amounts of storage space that requires. (Think of those digital pictures you probably receive -- those attachments alone can put a significant dent in four to six megabytes of storage.) Regardless of what you think of Google's potential as an IPO (and Fools are already having at it in the Fool Community), this is an important illustration of Google's power in the marketplace right now.
According to USA Today, Yahoo!'s chief operating officer said at its meeting, "We know where the Internet is going." What do you think? Is its Life Engine marketing campaign a persuasive campaign to steal Googlers? Share your opinions on the Yahoo! discussion board.
Alyce Lomax does not own shares of any of the companies mentioned. She thinks some of Gmail's functionality sets it apart from the rest.
