November 16, 2000 11:45 AM PST

AOL's lead in instant messaging arena dwindles

America Online's dominance in instant messaging has long been unquestioned, but it may not be as monopolistic as many of the company's fiercest critics portray it, a new study shows.

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Instant messenger fans try new toys
Anne Rickert, measurement analyst, Jupiter Media Metrix
In a survey of instant message usage in the United States released Thursday, Internet measurement company Media Metrix (a Jupiter Media Metrix company) reports that in just over a year, Yahoo and Microsoft have each amassed IM memberships totaling roughly half the population of AOL Instant Messenger (AIM). In addition, the two are increasing their audiences more rapidly than any other instant messaging companies.

As of August 2000, Yahoo Messenger had 10.6 million U.S. users, while MSN Messenger Service hit 10.3 million, the study shows. During the same period, AIM reached 21.5 million users, and AOL's ICQ subsidiary had 9.1 million, not counting international usage. ICQ numbers actually showed a decline from the previous year, when the service had more than 10 million active users.

In addition, nearly a third of AIM users also actively used a second IM client, Media Metrix found.

The study could influence an ongoing debate over AOL's obligations to accommodate instant messaging rivals that came late to the game and that now accuse the Internet giant of using its substantial head start to unfairly lock them out of the market.

"It is an answer to what the regulators have been fearing, which is whether AOL is choking the market by dominating it. And the answer is no," said Youssef Squali, an analyst at ING Barings.

"Having said that, the instant messaging market has yet to translate into revenues even for somebody like AOL. ICQ and AIM's contribution to AOL's revenues is so far minimal. All of the players have to find ways to monetize this substantial user base," he said.

The stakes are high. Initially underestimated in its popularity, instant messaging is a powerful form of communication that has become part of a larger conflict that will ultimately determine who controls much of the Internet itself. 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.

AOL underscored the importance of this fight last year by blocking other forms of instant messaging from working with its own. But this aggressive tactic increased scrutiny from Congress and federal regulators, who have been lobbied heavily by AOL competitors--led by the now-defunct CMGI-owned companies iCast and Tribal Voice--seeking to turn instant messaging into a key issue in the Time Warner merger.

AOL critics have testified in front of regulators demanding the government force the online giant to open its instant messaging network to rivals. Instant messaging proponents claim the technology could be as pervasive and influential as the telephone if a common communication standard is established. Competitors have also criticized AOL for backing away from its promises to open its network.

But according to the new study, AOL's decision to block rivals from using its network may not have harmed competitors and may have helped them catch up. Because instant messenger services are unable to communicate with each other, many U.S. Internet users now turn to two or more different instant messengers simultaneously to communicate with people using different services, Media Metrix reported.

Puppet masters: Who controls the Net "Duplication argues that (AOL) is not a monopolistic element in here," said Doug McFarland, president of Media Metrix. "AOL and ICQ had a very large user base, but in 15 months, both Yahoo and MSN messaging services have grown to between 10 million to 10.5 million users in the U.S. That's a very quick installed base."

For its part, AOL in July reported that AIM had surpassed 61 million registered users, 20 million of whom were active. Meanwhile, ICQ said it topped 70 million registered users with 20 million active users. These are global numbers and are not limited to the United States, as was the Media Metrix study.

An AOL representative declined to comment on the study.

 

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