December 4, 2000 9:10 AM PST
AOL rival drops instant messaging service
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PowWow, the instant messaging software owned by CMGI's CMGion division, posted a notice on its Web site informing visitors that it would cease to exist as of Jan. 19. CMGion, a Web content delivery company in stealth mode, acquired PowWow's parent company, Tribal Voice, in September.
"Please take the time to find a new service before January 19, 2001, to ensure no disruption in your instant messaging, chat and community services," the notice reads.
The posting comes just days after iCast, another CMGI-owned Web company with interests in instant messaging, closed its doors.
Tribal Voice and iCast have been vocal critics of AOL's market leadership in instant messaging, a technology that lets people exchange text messages in real time. The companies have argued that because instant messaging is a popular Internet feature that could potentially be as widely used as the telephone, one company should not control an overwhelming majority of the market. They have argued that AOL should open its network to other instant messaging companies.
The stakes are high. Initially underestimated in its popularity, instant messaging use has become widespread, and the technology has become part of a larger conflict that could determine who controls much of the Internet. As with email and browsers, companies that own this technology can lead their subscribers to advertising and other revenues while increasing the value of their real estate on the PC desktop.
Not surprisingly, most big Internet companies have engaged in the instant messaging battle. AOL tightly controls its AOL Instant Messenger (AIM) and ICQ messaging services. Together, the two services--which are not linked--comprise the largest body of instant messaging users. Microsoft, Yahoo, AT&T, Excite@Home and Prodigy have all pushed for AOL to open its network to competing technologies. Some of these opponents--including Microsoft, iCast and Tribal Voice, through PowWow--have tried to tap into AOL's instant messaging network to communicate with its members. AOL has responded by blocking their attempts.
Led by iCast and the then-Tribal Voice, a coalition was formed in July to develop a universal messaging technology, dubbed IMUnified. But the closures of PowWow and iCast will remove them from their founding positions in IMUnified, according to a CMGI representative.
iCast and Tribal Voice also have led the chorus of criticism against AOL. The companies were outspoken in their allegations that AOL nixed previous promises to open its instant messaging network to third parties.
The companies also said AOL was unfairly using its market dominance by blocking third-party attempts to communicate with its members. Executives such as iCast CEO Margaret Heffernan labeled AOL as "bullies."
The companies brought the attention of instant messaging to federal regulators and legislators examining the proposed merger between AOL and Time Warner. Company executives filed documents and testified before regulators in hopes of convincing the government to force AOL to open its instant messaging network to rivals as a condition to approving the merger.
During a Federal Communications Commission hearing in July, Tribal Voice's then-CEO, Ross Bagully, closed his testimony by exclaiming, "Tear down this wall, Mr. Case," in reference to AOL CEO Steve Case and the company's instant messaging policies.
Lobbying efforts throughout Washington have caught the attention of the FCC and some members of the Senate. But AOL executives continually dismiss their arguments, claiming the issue has little relevance to its proposed merger with Time Warner. Instant messaging is a feature to enhance a company but not a standalone business, AOL executives have said.
Some studies may be supporting AOL's claims. A study last month by Jupiter Media Metrix showed that AOL's AIM and ICQ had 21.5 million and 9.1 million members in the United States. That doesn't include their international audiences, which makes up the majority of ICQ members.
However, the study showed that AOL's fiercest competitors have rapidly increased their U.S. populations. As of August 2000, Yahoo Messenger had 10.6 million U.S. members, and MSN Messenger Service hit 10.3 million, the study showed. It also noted that competitors with large Internet audiences, such as MSN and Yahoo, can potentially find footholds in the growing instant messaging market.
Following iCast and free ISP 1stUp.com, PowWow becomes the latest business that CMGI plans to abandon. The company has taken a series of steps to trim its operating companies and cut costs through divestitures and layoffs. Like many Internet companies weathering the stock market storm, CMGI is trying to hasten profitability by cutting capital-intensive businesses.