Yahoo! is offering 25 times more storage space from Tuesday with its free e-mail service to counter Google's Gmail threat, reported The Register.

The size of Yahoo! free e-mail accounts has been increased to 100MB. "Yahoo! Mail Plus users, who pay for the service, will see their inboxes grow to 2GB of storage. Charges will be cut from $29.99 to $19.99 a year," said The Register.

The move is widely seen by analysts as a bid to ward off the Google challenge, which promises to offer users 1000 MB space.

Yahoo! Mail is also being redesigned. Yahoo! is also wooing new users, and urging existing users to sign up for more accounts, by opening up addresses that have been inactive for some time. Yahoo! currently junks e-mail addresses that have not been in use for more than six months.