Yahoo updates email in Google race

SAN FRANCISCO - Yahoo, owner of the biggest web email program in the United States, is revamping the service to attract more users and stave off defections to Google's Gmail and social networking sites.

Yahoo says it will introduce a version of email today that integrates posts from Twitter and delivers information at faster speeds.

The new service, still in a test phase, also improves searches, spam protection and the viewing of photos.

Chief executive Carol Bartz aims to keep from losing more users to Google, which is adding features such as video chats to Gmail, and counter social-communication sites such as Facebook.

Yahoo needs email to lure users to its web portal and sustain advertising, its biggest source of revenue.

"It's definitely a step in the right direction," said Aaron Kessler, an analyst with ThinkEquity in San Francisco, who recommends investors buy Yahoo's stock and does not own any.

"Google's taken the lead in terms of technology."

The number of Yahoo mail users in the US fell 10 per cent to 94.6 million in September from the same period a year earlier, according to ComScore in Reston, Virginia.

Google's Gmail, while still a distant No 2, rose 25 per cent to 49 million in that period. Microsoft's email service, ranked third, fell 5 per cent to 46.3 million.

All three companies face competition from social networks, which give web users new ways to stay in touch, such as through status updates, postings on one another's profile pages and chat features.

Total online email use declined 2 per cent in the US to 158.3 million, according to ComScore.

"They're being overshadowed by some of the social networking that's happening with Facebook and Twitter, where people are using some of these things almost in lieu of what they might have been doing with email," said Al Hilwa, an analyst at IDC in Redmond, Washington.

Yahoo's new email features, which users have to opt in to access, will let them reach out to friends through instant messaging and texting tools from their inboxes. The service will feature photos from Yahoo's Flickr, as well as Google's Picasa and YouTube video site.

"It's a fundamental transformation of the platform," said a vice-president at Yahoo, Kakul Srivastava.

"This is probably the biggest core re-architecture of the product in about five years."

While social-networking sites are changing the way people stay in touch, email is still an important way to communicate, according to Shar VanBoskirk, an analyst with Forrester Research in Cambridge, Massachusetts.

"Email is still a big deal," she said. "Email is never going to go away."

Google, the world's most popular search engine, built Gmail around the idea of making it easy to search for messages, rather than putting them in folders. The company's size and reach into different product areas were helping it attract users in ways Yahoo could not easily match, Hilwasaid.

Google's search page includes a prominent link to Gmail, and the company's mobile operating system, Android, encourages users to sign up for email accounts on their phones. Unlike Yahoo, Google also has its own web browser, Chrome.

EMAIL RIVALS

* Yahoo: 94.6m users
* Google Gmail: 49m users
* Microsoft Hotmail: 46.3m users

(US figures)

- BLOOMBERG