Yahoo! Nipping at Google's Heels on Email

Yahoo! (YHOO Quote) on Monday unveiled some mail enhancement products.

As part of its ongoing battle with Google (GOOG Quote) for the loyalty of Internet users, Yahoo! said it had implemented new antispam technology for its Web-based email service.

In addition, Yahoo! added several features to its email service that blur the distinctions between its offering and Gmail, the free email service that Google has been publicly testing for most of the year.

The two Internet giants appear locked in a growing feature war, the economic payoff of which is not yet clear.

"It seems to me that we're going to see a lot of this happening over the next year or two as each of them tries to improve on its functionality," says Jefferies analyst Youssef Squali. "The question is how monetizable each one of these functions is."

Yahoo!'s shares fell 24 cents Monday to trade at $37.56, while Google's shares were up $2.72 to $184.72.

As part of its email improvements, Yahoo! said it had started using technology it has developed called DomainKeys. That system, which Yahoo! is licensing to other Internet companies, uses cryptography to verify that email ostensibly sent by a particular sender -- say, a bank -- is actually from that sender.

Separately on Monday, the Internet service provider EarthLink (ELNK Quote) said it would be testing DomainKeys as a spam-fighting tool; Google, according to Yahoo!, is already using DomainKeys to help authenticate email being sent by Gmail users.

Among other changes, Yahoo! has increased the amount of storage space available to users of its free email service from 100 megabytes to 250 megabytes. Users of Yahoo!'s premium email service continue to have 2 gigabytes of storage space, but have a new per-email attachment size limit of 20 megabytes. Previously, Yahoo! Mail inboxes had been limited to a 10-megabyte attachment size.