MSN-Yahoo IM Deal Helps Fight AOL

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Microsoft and Yahoo's deal announced yesterday to interconnect their instant messaging platforms will help them compete better with America Online's AIM service and ultimately drive more users to their services, according to a search marketing executive.


"It's really a much broader effort on the part of those companies ... looking to control your desktop and the connection between your desktop and their Web properties," said Bryan Wiener, president and chief operating officer at search performance and marketing firm 360i, New York. "What it is looking to do is drive traffic to search engines. That's why instant messaging is so important to these companies. It's a control of the user, and they're able to funnel the user into other properties where they can make money and sell advertising."


AOL is the market leader in the IM space in the U.S., growing 6 percent from August 2004 to August 2005 with 49.2 million users of its AOL Instant Messenger and AIM application, according to comScore Media Metrix, Reston, Va.


Meanwhile, Yahoo Messenger usership dropped 14 percent in the same period to 24.4 million and Yahoo Messenger dropped 1 percent to 22 million. 


The interconnectivity will let MSN Messenger and Yahoo Messenger users communicate with each other, not only through text but also through voice, in the second quarter of 2006. The voice capability helps both companies compete better with Google Talk, an IM platform that provides voice capability.


"It's not a search engine play for Google anymore, it's a media and telecom play," Wiener said.


"While I think this is a constructive step for both companies to say they compete with AOL ... Google probably helped this process along, given their recent entry into the segment," said Scott Kessler, Internet equities analyst with Standard & Poor's, New York.


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