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Yahoo!, MSN Encroaching on AOL Instant Messenger Lead

The latest dirt from the front lines of the instant messenger wars is that the tide may be turning.

Market research firm Media Metrix Inc. Thursday released a report suggesting Yahoo! Messenger and MSN Messenger may be gaining marketshare in the U.S. on America Online Inc.'s AOL Instant Messenger (AIM), long considered an unstoppable juggernaut in the space.

Media Metrix's research found that AOL, which launched AIM in May 1997, is still the dominant player, with more than 21.5 million users in the U.S. as of August 2000, up from 18.1 million in August 1999. Its ICQ Chat client claimed 9.1 million users in the U.S. as of August 2000, down from 10.4 million in August 1999. But the other big names in the space, Yahoo! and Microsoft Corp., are growing rapidly. Yahoo! Messenger, launched in June 1999, grew to 10.6 million users in the U.S. by August 2000, and Microsoft's MSN Messenger Service, launched in July 1999, grew to 10.3 million users in the U.S. by August 2000.

But many of those users may be crossover users. The report indicates that 32 percent of people who use AIM at home also use at least one other competing instant messaging or chat application. At work the number of AIM users who also use another instant messaging or chat application is 25.6 percent. Users of Yahoo! Messenger or MSN Messenger are even more likely to use a competing application: 57.7 percent of home Yahoo! Messenger users utilize a competing service and 78.5 percent of those who use it at work do, while 54.9 percent of home users of MSN Messenger use a competing service and 83.1 percent of those who use it at work utilize a competing service.

The use of multiple services seems to be spurred by interoperability issues. Companies like Yahoo! and Microsoft -- as well as smaller companies like Odigo, or the now-defunct iCAST and Tribal Voice -- who followed America Online into the space have been lobbying regulators to force the online behemoth to open its instant messaging network to competitors. The companies argued that a common communication standard was needed to allow all players to compete on an even footing.

To date, America Online has resisted calls to open its network, citing security concerns on behalf of its customers. This led to a number of cyberspace skirmishes, with companies hacking into America Online's network to force interoperability. America Online then turned around and blocked access again. AOL has said in the past that it is committed to interoperability once privacy and security issues have been resolved.

America Online's decision to block access to competing services may have enticed some AIM users to download competing messengers.

"Instant messaging applications are proving to be very popular with consumers," said Doug McFarland, president of Media Metrix. "But their different features and lack of interoperability cause users, especially heavy users, to adopt more than one brand in order to keep in touch with all their friends and colleagues."

But Alexander Diamandis, vice president of Alliance Marketing for Odigo, argued that even if competing services are growing, AIM still holds the winning hand as long as it can keep its network proprietary.

"Whether AOL has 50 percent, 70 percent or 90 percent is somewhat immaterial because the network effect is still in place," Diamandis said. "Thus, though users are increasingly downloading other services (Odigo, MSN, Yahoo, etc.) they still will download AOL solely because of the size of the network."

Calls to America Online, Yahoo! and Microsoft were not returned as of this writing.