Yahoo Takes on Google Gmail with New 2-GB Limit

Yahoo (Nasdaq: YHOO) took its turn this week at raising its level of e-mail storage space, announcing that paying customers would get 2 GB of storage -- double what Google's (Nasdaq: GOOG) beta Gmail service provides. Users of Yahoo's free e-mail service will also get a boost -- up to a whopping 100 MB of free storage.

The move to the 2-GB limit follows Google's announcement of Gmail -- which integrates the popular search engine with a Web-based e-mail service capped at 1 GB -- and a surprise move by rival Lycos to boost its own e-mail storage limit to 1 GB. Yahoo, often a leader in the portal space, has raised the bar a bit more this week with the new size limit, advising users to "send monster-sized files -- photos, presentations, whatever!"

"Keep more of the things that are important to you without worrying about bumping up against your storage limit," the company said.

While the stampede to bigger storage might not be able to continue climbing at its current rate, consumers and other users are gaining significant advantages without size and storage limits holding back use or overly obtrusive advertisements spoiling experience.

Bigger and Better

Still, Yankee Group analyst Patrick Mahoney told TechNewsWorld that users might find that the heated competition for consumers will also deliver more advanced features and better e-mail capabilities.

Mahoney said Yahoo's new release, contrasted against Google's Gmail -- which is still in beta testing -- is Yahoo's way of establishing its size and strength in the e-mail and portal space.

"Basically, what they're showing, by doubling what Google could offer in Gmail, they're sort of showing some muscle in a sense," Mahoney said. "They're saying, 'We're bigger and better.'"

Google Innovation

Nevertheless, Mahoney said the game of one-upmanship was likely to subside at this point because 2 GB of storage is sufficient for most users.

"I don't foresee it continuing," Mahoney said. "There's only so far you can go with it. Storage is getting cheap, but not to the point where this will continue."

Mahoney, who has cited computer users' growing capacity needs with the prevalence of digital pictures, music and more, said Google will probably look for an edge by bringing its search capabilities to the world of Web-based e-mail, where subjects and bodies of e-mail messages can be quickly searched.

"That's one way they're looking to innovate," he said.

Portal Plays

Mahoney said Google also has a cash infusion coming with its planned IPO, adding that the company will likely be offering more portal-like services, including a possible instant messaging service.

Yahoo, on the other hand, is trying the difficult mix of Internet and media, but under the leadership of chairman and chief executive officer Terry Semel, the company is in a good position to capitalize on its brand and user base, according to Mahoney. He said the company has committed itself to changing from a portal company to a media company.

Nevertheless, both Yahoo and Google are focusing on the portal in general and what they can do with it as a business model, Mahoney added.

"These companies have realized the environment they're in is rapidly evolving," he said. "You've got to continue to develop and produce new services, even if they are free -- to keep the eyeballs on your services, which is what gets you the dollars."