AIMing at AOL

It’s no secret that AOL prizes its massive audience of instant messaging

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

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

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

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 He is also co-chair of Instant Messaging
Planet Conference and Expo
in San Jose, Calif., which begins Oct. 15.

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