At AOL, Shooting the Instant Messenger

Savor the irony as Steve Case tries to keep AOL a closed system, much to everyone's disadvantage.
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My Saturday morning began with a bang. Up early, I strolled out to the gate to get the morning papers. (Yes, JJC, I'm still a creature of habit, and still read some dead-tree pubs.) Came back, sat down on the balcony with

The New York Times

-- the Saturday edition has always been my favorite: It's the place the

Times

has the space and inclination to open up a little and run off-the-main-road stories, a little like the old Charlie Kuralt

On The Road

show on

CBS

-- and relaxed with a mug of near-boiling coffee to indulge in my early morning read.

Then I spotted Saul Hansell's story on the left side of page one, about

America Online's

(AOL)

idiotic retaliation against

Microsoft

(MSFT) - Get Report

and

Yahoo!

(YHOO)

for their Thursday release of new instant-messaging software that allows MSN and Yahoo! users to communicate with AOL instant-messaging fans.

I stood up, screamed an obscenity I can't repeat here, threw the

Times

over the edge of the balcony ... and dumped about 10.7 ounces of scalding coffee on myself. I felt like that woman in the suit against

McDonald's

(MCD) - Get Report

for serving coffee too damn hot.

I walked in, dealt with the wounds, changed pants, went back out and sat down to ponder whether my reaction was maybe just ... umm ... a little over the top. Then I realized I had to go down and pick up the wind-scattered

Times

to read the rest of the story, and did, and read to the bottom -- and knew that I hadn't overreacted.

This kind of nonsense by AOL isn't fatal by any stretch of the imagination. It's not like announcing a bad quarter after you've pumped the analysts, or like

Steve Case

announcing he's come to believe most technology inventions were brought to us by little men from space. It won't send the stock into a 25-point tailspin.

But it is a

stupid

thing to do, something that screams to the world that in spite of its 18 million-plus AOL members, the 46% jump in its most recent quarter's revenue, the billion-dollar year just concluded ... America Online STILL DOESN'T GET IT about the Web.

Dear Steve: The Web is all about CONNECTING us, not keeping us apart through electronic walls, corporate gamesmanship and phony excuses. Period.
-- JS

A letter from a reader and friend of

TheStreet.com

a little later on Saturday morning said it even more plainly: "AOL is anti-Web." How ironic that the big gorilla in Web access, the first company to come to mind for most Americans if you ask them to name a Web-related business, could be called "anti-Web."

But it's true.

AOL is so worried about its own (perceived) proprietary interest here that again on Friday, just hours after Microsoft had tweaked its instant-messaging software to make it possible for MSN Messenger users to talk once again to AOL's instant messaging users, AOL had rebuilt its electronic wall, designed to keep Those People out.

It's important to note that AOL wasn't trying to defend its paying-customer base here; it distributes its instant messaging software at no charge to all comers, encourages PC makers to preload it on new PCs, and pushes hard for software developers to include it on their CDs and in their download packages, so it will be auto-installed on their customers' machines. (For example, anyone's who downloaded and installed the latest upgrade of

Real Networks'

(RNWK) - Get Report

free G2 Player and the beta of its RealJukebox software now has AOL Instant Messenger installed on their computer's hard disk.)

Nope, this isn't protecting the paying-customer base from poaching by two big and dangerous competitors; this is freezing out the world, when the world wants to chat with the 40 million-50 million users of AOL Instant Messaging.

(Or is it freezing

in

those AOL IM users?)

Either way it's dumb, Steve, dumb. And unnecessary. And it makes AOL look bad, very bad.

Hypocrisies are rampant in the computer and Web businesses, but we may have set a record, with at least three sticking up here like sore thumbs:

  • Most egregiously, while AOL is working the federal courts and lobbying city councils across America like crazy to get those judges and boards to force AT&T (T) - Get Report (which I am long) and other cable-modem Internet access providers to open their networks to all content suppliers, here is AOL actively closing an already open system, to the obvious detriment of its customers! Can't work both sides of the street, guys: Either you do or don't favor open systems.
  • Microsoft, always ready to hum its own little hypocritical ditties, Friday jumped in with claims that AOL was using its proprietary technology to prevent fair competition based on known, open standards. Mmm, Mr. Gates, you may recall that was exactly the complaint used by Netscape, now part of AOL (ahh, the little twists here... ), to entice the feds into suing Microsoft -- you know, that suit by the Justice Department in Washington, the one that has taken up so much of Microsoft's time and money over the past year? Remember that one, Bill? Again: You can't work both sides of the street, guys: Either you do or don't favor open systems.
  • Finally, and maybe most embarrassingly, AOL is trying here to hide behind the skirts of its customers' privacy. AOL actually claimed that since the MSN Messenger and Yahoo software require that users type in the AOL screen name and password they've registered with AOL for instant messaging, Microsoft and Yahoo were undermining the security and privacy of AOL's IM clients. Excuuuuse me, Steve, but how else would I be identifiable, as an online instant messenger, to those on my buddy list currently online, unless I provided my screen name and password? Exactly.

I feel for companies that lose their lead to unanticipated technological advances by competitors, or zig when the market zags, or run into unforeseeable events such as the Asian collapse or the Tylenol poisonings or Hurricane Andrew-scale natural disasters.

But I don't have a lot of sympathy for companies that shoot themselves in the foot in moves so stupid, needless and unavailing as this one.

C'mon, Case, Pittman and the rest of you senior managers at AOL: Fix this and fix it fast. Don't lock your AOL Instant Messaging users in a box. Or lock the rest of us out.

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, Seymour was long AT&T, although positions can change at any time. Seymour does not write about companies that are consulting clients of Seymour Group, or have been in recent years. While Seymour cannot provide investment advice or recommendations, he invites your feedback at

jseymour@thestreet.com.