Google's Gmail will need some updates to grab a piece of the spotlight, but Yahoo Mail needs an overhaul and it needs to move fast, according to industry analysts.
"This really ups the ante in the email game," said Al Hilwa, an analyst with IDC. "Microsoft's email may start to increase its adoption rate ... Everyone is at risk of market share changes. This is what it means to play in a competitive market."
Earlier this week, Microsoft took the wraps off Outlook.com, its new webmail service, which is set up to eventually replace the company's Hotmail. The updated service is a major redesign that synchronizes Outlook.com accounts across a range of devices and is integrated with social networking sites like Facebook, Twitter and LinkedIn.
With social connections, rich media, photos and video chat, Outlook.com is set to make older email services look stale. That could lure longtime Gmail or Yahoo Mail users away to try a new flashier email platform.
"I think there's a good chance that Microsoft can steal users from both Google and Yahoo with this new service," said Dan Olds, an analyst with The Gabriel Consulting Group. "These services are important to their respective companies since they are often the entry point for new users."
Since email is important to Google and Yahoo, both companies need to keep their users' attention from straying.
For Google, that may be an easier job since the company has been integrating social features from its Google+ network into Gmail.
Just this week, Google announced it is adding its Google+ Hangout feature, which allows users to video chat with up to nine people, to Gmail. The new service also will allow multiple Gmail users to view YouTube videos together, collaborate on Google documents and share their screen view.
Gmail also has a "People" widget geared to bring up the user's picture and offer quick links to start a Hangout or to show recent posts on Google+.
"I don't think Google needs to do too much here," said Brad Shimmin, an analyst with CurrentAnalysis. "They've already been quite active in socializing Gmail through Google+. For example, they completely revised Gmail's video collaboration service with Hangouts, which has become one of the company's bright stars in terms of garnering the attention of users and developers alike."
However, Olds said Gmail could use some updates of its own.
"Gmail, even with their newest user interface, isn't exactly intuitive for many users," he added. "Outlook.com looks to be easier to use and understand for both experienced and new users. Outlook also has more hooks into more social networking services, which is increasingly important to large numbers of users. Gmail doesn't present many obvious options for connecting to social networks aside from Google's own Google+ network, which makes them look less flexible."
Olds pointed out that people can use Outlook.com to read email from their Gmail accounts, making it easier for Gmail users to migrate or at least give Outlook.com a test drive.
All the analysts agreed, however, that Yahoo has the most work to do to keep their users interested and engaged.
"As far as email services go, Yahoo isn't old school. It predates old school," said Zeus Kerravala, an analyst with ZK Research. "It's just very vanilla... I think they need a refresh on it right away or risk becoming one of those vendors that can never attract new customers and slowly loses current ones."
Yahoo, as a company, has been dealing with a series of troubles, including a management scandal and having three different people in its CEO seat in less than a year. Now Marissa Mayer, who had been a top executive with Google for most of her career, took over as Yahoo's latest CEO a few weeks ago.
By all accounts, Mayer has a lot of urgent issues on her plate. However, she may have to add email to her to-do list if she doesn't want to lose control of that asset.
"Yahoo has lots of challenges, as we all know, but they can't afford to neglect their email platform," he said.
Ezra Gottheil, an analyst with Technology Business Research, said there's no need for Yahoo to panic at this point but they need to start evolving the service.
"I'll tell you one thing, they had better lose those graphical ads," he added. "I don't want to see a hot dog with a flashing light on his head when I'm reading my mail... And it looks like their options are pretty limited. It does look old fashioned. And it has the folder system, not the label system. For me, that's bad."
As much work as Yahoo, or even Google, needs to do, Gottheil said there's one big factor in their favor. It's a lot of trouble to switch email services, and no matter how intriguing a new service is, people may drag their feet at the amount of work that migrating would entail.
"Remember that changing your email service is like moving to a new city," he said. "It's a lot of work, and it takes a long time to get used to your new place ... You can always tell the early adopters. They're the ones cursing under their breaths."