The Long Battle for an Instant Messaging Standard

By V. Viard, Steven Fan
2005 | Case No. SM138
For the last five years, America Online (AOL), Yahoo!, and Microsoft have been battling to grab market share for their instant messaging (IM) service. Each company has its own software and network to deliver the service, which allows users to write online, real-time text messages with other users on the same network. Although IM began as a small venture in 1996 by four Israeli engineers, it has ballooned into one of the largest means of online communication. The number of IM users has grown 30% faster in its first five years than that of email when it was first launched. Today, almost half of all North American online households use some version of IM. The media has proclaimed IM as being everywhere, “eating away at landline [telephone] use and displacing personal conversations.” Despite the large number of IM users, the three major providers, AOL, Yahoo!, and Microsoft, have not earned any significant profit from offering their services. Each firm offers its IM service for free and many questions remain as to how any company will one day capitalize on its millions of users. Some looked to the possibility of developing IM as a corporate technology tool, allowing co-workers to securely send messages to one another, and efforts were already underway to make this a reality. Firms have also made significant efforts to establish a common protocol for IM that would enable users to communicate across different networks. But competition amongst the firms has hampered progress, forcing analysts to wonder: will consumers continue to tolerate using multiple IM programs to reach friends on different networks? As instant messaging moves forward, AOL, Yahoo! and Microsoft will all have to resolve these issues.
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