RealTime IT News

AIMing at AOL

It's no secret that AOL prizes its massive audience of instant messaging users.

In 1997, AOL launched its desktop client -- AOL Instant Messenger (AIM) -- for its IM network, setting in motion the feverish growth that instant messaging has seen in this country, first among teens, and more recently, among adult professionals.

Today, millions of Internet users trade messages over the network (which actually has been accessible by AOL subscribers since 1989.) The technology has become so widespread that it's even attracted the attention of federal communications authorities and Wall Street regulators. And lest anyone doubt the ascendancy of instant messaging in AOL's own brand identity, check out the company's latest television spots. The "Running Man" icon, which began as a mere logo for its instant messenger client, is featured prominently as a proxy for the entire online service -- interacting with celebs like Carson Daly and Sharon Stone and pitching offerings like AOL 9.0 for Broadband.

Not surprisingly, AOL continues invest heavily when it comes to the technology. First and foremost, those efforts center around ways to make money from its huge public IM network, which has been free since its inception.

One way we've seen this happening comes as AOL devises IM-related products to sell to businesses, enabling companies to manage and log their employees' use of instant messaging, for instance.

The media conglomerate also is looking for ways to make money from its vast audience of consumer IM users by fashioning IM into a launch pad for new revenue opportunities.

In coming months, the company plans to add online, multi-player games to the AIM client -- games enabling users to play each other. Those games will be subsidized by advertisers or purchased directly by end-users.

To spread the word virally, AOL will offer users the ability to invite new friends to try out the games. Aside from the handful of titles that will launch with the service, more are expected in the near future -- potentially from game publishers in addition to AOL's current partner, WildTangent. Console and PC gaming giant Electronic Arts seems like a likely candidate, since it already has an online game distribution agreement with America Online.

When AIM Games launches officially, it will mark the second fee-based consumer product introduced in connection with AOL's IM network. Earlier this year, the company began charging AIM users (but not subscribers to the America Online service) to download and trade skins -- called Expressions. Expressions gets a revamp in the latest version of AIM, in the form of sounds that can be sent to other users in connection with their selected skin.

AOL also is exploring other consumer services that it can overlay on its IM network. For instance, executives have discussed the possibility of integrating popular applications like dating services. In what might be a first step toward this type of offering, the company is already testing what it calls "Buddy Match," a service that connects like-minded AOL subscribers -- if others on a user's Buddy List have similar hobbies or interests, a colored background will appear behind their name.

This mirrors a trend happening throughout the industry. We've seen Microsoft's MSN Messenger offering connectivity to Voice-over-IP providers and the company's own .NET Voice Messaging service -- all of which provide a source of revenue for the Redmond, Wash., software giant. Meanwhile, Yahoo! promotes its e-mail service through the IM client, which has a fee component, and has been lately integrating search into the client -- a boon for its paid search listings business.

AOL has also busy striking deals with wireless carriers. In September, the company teamed up with Cingular Wireless, enabling mobile users to forward IMs to mobile phones and, once development work is complete, use a version of AIM embedded in their phones. AOL has similar embedded AIM deals with AT&T Wireless and T-Mobile, and AIM-via-text messaging agreements with Verizon Wireless, Sprint and Nextel. In July, the company expanded its relationship with Sprint to add AIM clients to the carrier's 3G wireless devices.

While AOL hasn't been explicit on how it plans to make money from wireless, mobile IM has one clear advantage over desktop IM: there are established revenue models involved. For instance, wireless subscribers typically pay for each text message they send or receive, and can buy messages in bulk -- and carriers are willing to share this revenue with advertisers and partners, in return for boosting usage.

Carriers also are increasingly eager to pay for value-added data and entertainment services to differentiate themselves from rivals, as competition and churn remain high and average revenue per users continues to be low.

In coming weeks, AOL also is planning to test-market a new advertising unit within the AIM Buddy List -- a television-length "rich media" ad, complete with video and sound.

User experience

Of course, AOL also is spending heavily simply to better users' experiences with AIM and AOL IM. For instance, adding new features to AIM continues AOL's efforts to bring the client up to parity with rivals.

For one thing, AOL is just months away from launching controversial videoconferencing services within the AOL and AIM instant messaging clients. The company received the green light for such a service in August, when the FCC removed a two-year-old restriction that had prohibited AOL from offering advanced, high-speed Internet services -- like videoconferencing -- over its IM network, in an effort to stave off a possible monopoly.

To get the ban lifted, AOL successfully convinced the FCC that it no longer was the "dominant" player in IM -- despite it still being the space's largest player. (AOL also would have been allowed to launch video by the FCC had it taken the extraordinary measure of opening its service to interoperability with other IM networks.)

Such an upgrade will enable AIM and AOL IM to better resist losing users to Microsoft's and Yahoo!'s IM networks. Yahoo! has offered Webcams and multi-player games -- as part of its IMVironments skinning feature -- for years. Meanwhile, several months ago, Microsoft began supporting Webcam connectivity in its IM client, and recently debuted a new version of MSN Messenger that more closely integrates video, as well as multiplayer games.

Aside from competing with rivals on features, AOL also is looking for ways to stand out.

As with Expressions, America Online has begun offering "SuperBuddies" -- comical, animated, and sound-enhanced 3D Buddy Icons -- for free to users of AOL's built-in IM client. Viewable only by AOL 9.0 Optimized subscribers, SuperBuddies appear within in instant message conversation windows, like regular Buddy Icons. But unlike their static, 2D predecessors, SuperBuddies react to chatters' emoticons, abbreviations, and Away messages -- giving a wink, for instance, when a user types ";-)". Like Expressions, they can be traded among friends.

Unlike Expressions, there's currently no revenue stream here -- just a way to offer a small value-add to America Online members. AOL 9.0 Optimized launches with about 50 icons, but the company plans to ramp up to more than 100 over the next 12 months.

At the same time, America Online is also exploring other ways to increase its appeal. In recent customer surveys, America Online has been researching whether users would be interested in the ability to logon simultaneously with multiple AOL ScreenNames. It also asked about whether users want the ability to log in from multiple locations or devices at once, and receiving messages simultaneously in each location (similarly to functionality offered in other IM systems, like Jabber.)

America Online is also testing AIM Express 4.0 -- an upgrade to its lightweight, Java implementation of AIM, geared toward traveling users or those with access only to the Web. While AIM Express lacks a handful of the features available in AIM, it's rapidly catching up. Currently, version 4.0 resembles AOL IM, and even incorporates a number of its unique features, like support for AOL Calendar, and the ability for users to add and view user icons within the Buddy List.

So, with video and games, new gimmicks for users and new opportunities for advertisers, America Online seems to be pulling out all stops to keep its IM network the world's most popular while also seeking ways to make a buck.

But in Microsoft and Yahoo!, AOL is facing experienced, persistent and eager rivals who have led innovation in the consumer instant messaging space in recent years, which might explain why the AOL "Running Man" is still running after these six years: to keep ahead of the pack.

Christopher Saunders is managing editor of InstantMessagingPlanet.com. He is also co-chair of Instant Messaging Planet Conference and Expo in San Jose, Calif., which begins Oct. 15.