As America Online ( AOL) and Time Warner ( TWX) shareholders prepare to vote Friday, there is an unlikely cloud on the horizon. Not only is the Justice Department eyeballing concentration in Time Warner and AOL media properties, they are also taking a deep and meaningful look into instant messaging, or IM, as part of the review of the companies' $130 billion merger. Competitors to AOL's AOL Instant Messenger and ICQ instant messaging services -- such as Yahoo! ( YHOO), with its Yahoo! Messenger service, or CMGI ( CMGI), through subsidiary Tribal Voice's PowWow -- are hoping that after the shareholders approve the combination, the government will make AOL commit to interoperability as a condition of the proposed deal. It turns out, there's a lot of money at stake in IM. AOL's rivals are fighting to gain compatibility with AOL's instant-messaging services because unification offers the prospect of vast revenue streams, whether through software licensing, advertising and e-commerce or directory services. These rivals say they'll be locked out of those markets unless the government pushes AOL toward what's called interoperability -- the ability to communicate with people using another company's instant messaging service. If that doesn't happen, competitors say, AOL might end up dominating the instant-messaging market the way Microsoft ( MSFT) has owned the market for personal computer operating systems. Last week, AOL proposed a set of guidelines for interoperability, though it's unclear if and when AOL and other companies will mesh their systems. The entire debate raises the question of how AOL or its rivals might make a popular free service into a big moneymaker.
"It's a pretty powerful concept," says Card. Were the directory in AOL's hands, "It's something that would certainly lock you into an AOL service. ... The more they'd control it, the less you'd want to go away to some other place." But the directory idea isn't the only attraction for businesses, says Tribal Voice CEO Ross Bagully, who sees licensing as a major money maker for IM providers. A major corporation, for example, could have an instant-messaging system set up through a secure computer for the use of employees, partners and suppliers. "That would be a huge application, and of course, there would be license fees associated with that," Bagully says.
Finding the ValueWhere's the commercial value of instant messaging? Depends who you ask. David Card, senior analyst for Jupiter Communications, sees instant messaging as an essential part of some next-generation unified-messaging system. This directory, an electronic descendant of the phone book, would manage a user's communications, routing calls and emails to the appropriate address or device according to instructions it's given. Card and others say the ability of instant-messaging systems to detect whether a user is online, and where, make IM a crucial part of this unified-directory system.
|Stock at a Glance |
|Recent Price||58 1/4|
|52-week high||95 13/16|
|52-week low||38 7/16|
|Market cap||$131 billion|
|Source: Company, Yahoo! Finance.|