Yahoo Acquires E-mail Startup As Battle With Google Heats Up

Yahoo closed the deal at the end of last week without making an announcement. Yahoo and Oddpost confirmed the acquisition Tuesday without disclosing the financial details.

Meanwhile, Google continues to expand beyond its renowned online search engine. The company said Tuesday that it has bought Picasa, a company that makes tools for managing and sharing digital photos. Google didn't reveal the financial terms of that deal either. Yahoo already offers its own photo-sharing service.

Yahoo's Oddpost acquisition appears to be the company's latest countermeasure to Google's foray into e-mail.

It's an important battleground. E-mail serves as a powerful magnet that draws people to the companies' Web sites, which depend on a steady flow of traffic to increase advertising revenue.

Since its launch in San Francisco three years ago, Oddpost has labored in relative obscurity despite winning praise for developing a Web-based e-mail service that works more like a desktop application.

Oddpost had been charging $30 per year for its e-mail service, but has stopped opening new accounts because of the Yahoo acquisition. The company's existing e-mail subscribers -- the company has not disclosed how many it has -- will be shifted to Yahoo's service, which ranks among the world's most popular.

The test version of Google's free e-mail service, unveiled under the Gmail brand three months ago, has led Yahoo to aggressively protect its turf.

In one of the biggest changes, Yahoo expanded the amount of free e-mail storage from four megabytes to 100 megabytes -- a move spurred by Gmail's plans to give away 1,000 megabytes to each accountholder.

Several other Web-based e-mail services, including Microsoft's Hotmail, have either expanded their free storage already or announced plans to do so.

As part of the company's quarterly earnings announcement last week, Yahoo CEO Terry Semel promised some "really cool additions" to the e-mail service this year. Oddpost's 10-employee team presumably will play an integral role in the upgrade.

"We intend to tap into Oddpost's fresh ideas and technological expertise," Yahoo spokeswoman Mary Osako said.

Google hasn't disclosed when Gmail will be available to the general public. The service has been limited to people who have been invited to join by Google management or other accountholders. Some Gmail invitations have been auctioned on eBay, reflecting the high level of curiosity about the service.

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