For computer users, instant messaging is, well, instantaneous.

But for

AOL Time Warner's

(AOL)

America Online,

Reuters

(RTRSY)

and other public companies seeking to make money off of IM -- well, that is taking a little longer.

Yet progress is being made, nonetheless. When AOL and Reuters last week announced a deal to link Reuters' year-old IM service to AOL's dominant instant messaging network -- a major step, after years of friction on the subject, in AOL's linkages to other companies' instant messaging systems -- the deal cast a spotlight on how companies could translate the immense popularity of instant messaging among Internet users into substantial amounts of cold, hard cash.

AOL's ubiquity -- the company's IM properties had 50.6 million U.S. users in July, according to comScore Media Metrix -- means that AOL can make money from granting other companies' access to its network.

And for companies such as AOL, Reuters and

IBM

(IBM) - Get Report

,

Microsoft

(MSFT) - Get Report

and

Yahoo!

(YHOO)

, IM's potential business applications -- especially among customers in the financial services business -- means they can charge for features that corporate customers, unlike recreational users, might find useful or necessary.

Now investors are hoping to see the payoff start to roll in. On Monday, AOL fell 27 cents to $15.80, IBM jumped 58 cents to $89.28, Microsoft rose 14 cents to $28.48 and Yahoo! added 6 cents to $34.88.

Wrapping Presence

Ultimately, the real payoff for IM is not in sending messages, but in serving as a "presence platform," says Robert Mahowald, a research manager at IDC. That means using the IM network to determine where a user is -- say, sitting next to his desktop computer, on the road with his cell phone, or elsewhere. "Messaging is great as a foot in the door," says Mahowald. "But the presence is where it's at."

For all of the ink that has been spilled over instant messaging -- three years ago, for example, access to AOL's network was a major point of contention in the approval process for the merger of AOL and Time Warner -- the amount of money at issue is relatively small, as far as major media and software companies might be concerned.

The market for IM software and services amounted to $167 million in 2002, says Mahowald, though that number doesn't include such elements as wireless IM revenues or custom integration of IM with existing applications at a company.

The largest share of that money, says Mahowald, went to IBM for its Lotus Sametime product, now known as IBM Lotus Instant Messaging and Web Conferencing. Other players include smaller private firms such as

FaceTime Communications

,

IMlogic

and

Akonix

, which offer products enabling corporations to manage their employees' IM usage.

But, says Mahowald, the future looks promising. He forecasts a compound annual growth rate of 20% for IM -- well ahead of software markets overall -- resulting in a $570 million market in 2007. Though that kind of money may still not move the revenue dial for major corporations, it doesn't include wireless revenue streams or money from other applications that might be built on top of IM.

Gotta Wear Shades

In the meantime, companies such as AOL and Reuters see manifold promise for IM.

As part of last week's deal, AOL will apparently be charging Reuters for the privilege of connecting Reuters Messaging users, who now number 50,000, to AOL's 50-million plus community of users. AOL and Reuters declined to discuss the financial details of their agreement, which is set to take effect in the first quarter of next year.

Meanwhile, AOL senior vice president Bruce Stewart notes that business users have particular needs that they're willing to pay for, including integrated virus protection, encryption, auditing and control -- that is, enabling network administrators to determine, for example, whether certain users can IM people outside of a corporation, or whether they're allowed to send and receive files via IM. AOL launched its AOL Instant Messenger Services for businesses last fall.

Reuters, which currently offers Reuters Messaging for free to companies in the financial industry, plans to start charging for a separate, upgraded version early next year, says David Gurle, executive vice president of collaboration services at Reuters. That upgraded version will include not only the connection to AOL's IM users, but also other features such as the ability to broadcast the same instant message to numerous users simultaneously. The AOL connection, he points out, will make it easier for professionals in the financial community, using Reuters' product, to communicate with consumers who are already tied into AOL's network.

Another planned feature is what Gurle calls "structured text messages," or forms. Though securities firms currently refuse to conduct financial transactions by email, Gurle imagines a time when stock trading -- or at least transaction price-setting -- could be conducted via an IM-based form. Despite the inevitable regulatory hurdles, says Gurle, "The migration to such trading scenarios are on the horizon."

Popsicle Effect

Instant messaging makes money for Reuters indirectly by making its overall service more competitive and more "sticky," says Gurle. "The more integration IM enables between the information you process and the people you connect with, the higher is the indirect value," he says.

More directly, IM can make money by serving as a springboard to other modes of communication, such as a teleconference or video conference. Reuters could thus get a share of the revenue generated by setting up such a conference, he says.

Mahowald calls the agreement between AOL and Reuters a smart one. AOL, for its part, gets an opening in the financial community, which he says is the industry responsible for half of all corporate spending on IM. Reuters users get access to a much larger network than previously available, making its service more valuable.

As AOL, Microsoft and Yahoo! expand their IM services for business, says Mahowald, the IM business will take off. "A rising tide will raise all ships," he says. "We just haven't seen it yet."