Yahoo! Inc., owner of the biggest Web e-mail program in the U.S., is updating the service to attract more users and stem defections to Google Inc.’s Gmail and social-networking sites.
Yahoo said it will introduce a version of e-mail today that integrates posts from Twitter Inc. 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 Officer Carol Bartz aims to counter social- communication sites like Facebook Inc. and keep from losing more users to Google, which is adding features such as video chats to Gmail. Yahoo needs e-mail 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 LLC in San Francisco, who recommends investors buy Yahoo’s stock and doesn’t own it. “Google’s taken the lead in terms of technology.”
The number of Yahoo mail users in the U.S. fell 10 percent to 94.6 million in September from the year-earlier period, according to ComScore Inc. in Reston, Virginia. Google’s Gmail, while still a distant No. 2, rose 25 percent to 49 million in that period. Microsoft Corp.’s e-mail service, ranked third, fell 5 percent 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 e-mail usage declined 2 percent in the U.S. 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 e-mail,” said Al Hilwa, an analyst at IDC in Redmond, Washington.
Yahoo, based in Sunnyvale, California, rose 6 cents to $16.46 yesterday on the Nasdaq Stock Market. The shares have fallen 1.9 percent this year.
Yahoo’s new e-mail features, which users have to opt in to access, will let them reach out to friends through instant messaging and texting tools from their in-boxes. 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 Kakul Srivastava, a vice president at Yahoo. “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, e-mail is still an important way to communicate, said Shar VanBoskirk, an analyst with Forrester Research Inc. in Cambridge, Massachusetts.
“E-mail is still a big deal,” VanBoskirk said. “E-mail 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 are helping it attract users in ways that Yahoo can’t easily match, Hilwa said.
Google’s search page includes a prominent link to Gmail, and the company’s mobile operating system, Android, encourages users to sign up for e-mail accounts on their phones. Unlike Yahoo, Google also has its own Web browser, Chrome.
“Google really has a platform to win new users,” Hilwa said.
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