Yahoo! is shutting down Yahoo! Photos in a week. It’s tough for a company to paint a pretty picture with that sorta information but I think the way they’ve handled this touchy situation is impressive.

1) They sent an email 2+ months in advance so customers had time to prepare for the closing.

For some time now, we’ve supported two great photo sharing services: Yahoo! Photos and Flickr. But even good things come to an end, and we’ve decided to close Yahoo! Photos to focus all our efforts on Flickr — the award-winning photo sharing community that TIME Magazine has called “completely addictive.”

We will officially close Yahoo! Photos on Thursday, September 20, 2007, at 9 p.m. PDT. Until then, we are offering you the opportunity to move to another photo sharing service (Flickr, KODAK Gallery, Shutterfly, Snapfish, or Photobucket), download your original-resolution photos back to your computer, or buy an archive CD from our featured partner (for users of the New Yahoo! Photos only). All you need to do is tell us what to do with your photos before we close, after which any photos remaining on Yahoo! Photos will be deleted and no longer accessible.

Of course, we hope you’ll join us at Flickr (you can even use your Yahoo! ID), but we also realize that Flickr may not be for everyone. In the end, we want you to find the service that’s right for you, and we hope you take some time to learn more about your options before making this important decision.

2) They provide a list of alternative photo sites: Flickr, KODAK Gallery, Shutterfly, Snapfish, or Photobucket. This way customers know their options and don’t feel left up a creek without a paddle.

3) They offer to do the heavy lifting and move photos to any of these other photo sharing services. No need for customers to go through a downloading and re-uploading hassle. They also do a good job explaining exactly how the transfer works, down to the number of emails to expect and how long it will take.

4) Just want your photos back? You can download hi-res photos individually or buy an archive CD at a reduced price. Too bad there’s no way to download all your photos at once though (they don’t “technically support” this).

5) They offer clear FAQs about the closing and how to move photos elsewhere.

6) They understandably pitch their own related service, Flickr, but also acknolwedge it may not be for everyone. “In the end, we want you to find the service that’s right for you, and we hope you take some time to learn more about your options before making this important decision.”

No one wants to shut down a service. But if you’ve gotta do it, Yahoo!’s approach offers some lessons on how to do it thoughtfully and in a way that minimizes customer frustration.