SAN FRANCISCO - Yahoo chief Marissa Mayer on Monday said the Internet firm will begin encrypting data to protect users from online snooping.
By April of next year, Yahoo will have encryption in place to protect information shared by users of its online properties as well as information exchanged between the Internet firm's data centres, Mayer said in a blog post.
Google has already begun scrambling most of the traffic at its websites as technology firms grapple with moves by US intelligence agencies to spy on what people are doing and sharing online.
"As you know, there have been a number of reports over the last six months about the US government secretly accessing user data without the knowledge of tech companies, including Yahoo," Mayer said.
"We will continue to evaluate how we can protect our users' privacy and their data."
Mayer said that a more sophisticated encryption system will be in place at Yahoo's free Web mail service by January 8 to protect user privacy.
Meanwhile, a freshly-filed lawsuit in California accuses Yahoo of violating privacy by scanning Yahoo Mail messages for information to better target advertising.
The suit seeks class action status and asks that Yahoo be ordered to pay US$5,000 (S$6,200) per user, or treble that amount as permitted by civil law. Yahoo Mail reportedly has about 275 million users, according to the legal filing.
"Because Yahoo's revenue model is so fundamentally dependent on advertising, and because it can increase revenues by building more accurate dossiers, it is strongly incentivised to gather as much personal information on users no matter how sensitive - or illegal," the lawsuit said.
Yahoo scans incoming email messages regardless which service senders use, according to the lawsuit filed on behalf of a California man on November 15 in federal court in the Silicon Valley city of San Jose.
Yahoo, Google, Microsoft and other Internet titans have vehemently denied ever letting US spy agencies tap directly into their data, maintaining that they have only provide information backed by court-sanctioned requests.
America's ultra-secret National Security Agency reluctantly finds itself in the headlines amid a wave of disclosures from ex-intelligence contractor Edward Snowden, who has exposed the service's vast electronic spying operation.
The agency uses super computers, linguists and code-breaking mathematicians to oversee what experts say is the world's most powerful digital espionage organisation.