AOL Time Warner, which pioneered instant messaging and counts it as a crucial feature, stands to lose the most potentially lucrative part of the market: business users.
America Online has shunned efforts to make its IM service more useful for businesses, while competitors, including Microsoft, have jumped in, seeing potential profits from messaging and piggyback applications.
Because AOLs service is proprietary and lacks sophisticated security and access control, the company may fall behind as efforts gather steam to create open standards that developers can use to write revenue-producing applications.
It is AOLs market to lose. AOLs IM service has become wildly popular with businesses. Some 6 million people used the Web-based version of AIM each workday in February, according to Jupiter Media Metrix. Those business users — nearly one-fifth of online U.S. workers — average more than six hours per month actively sending and receiving messages via IM.
"IM is a fundamental business tool, in an ad hoc kind of way," said Lou Latham, a Gartner Group analyst. "I tell clients, you have no idea how many of your people are using AIM right now — it could be half of them."
The future of IM, and its profitability, is based partly on a technology called "presence." Users know when one of their friends or co-workers is online just by looking at the IM directory.
Starting from the basic premise of "presence," hundreds of applications can be designed and layered on, which could make a business more productive, from supply chain management to business-to-business e-commerce.
For example, a phone system could be set up to call certain people into a conference when they log on. The presence rules can be expanded from "if" somebody is online, to where, with what device and whether they are taking phone calls.
Latham predicts businesses will flock to workgroup collaboration tools; Microsofts HailStorm technology has already attracted partners including eBay and American Express.
Because AOLs presence technology — its "buddy list" — is essentially closed, analysts said, interactive managers might not formally adopt the system. The software isnt technologically compatible with developing open standards — and doesnt offer security, access control and other features.
AOL, far from planning to open its system, managed to escape strenuous efforts to force the opening of the system as a condition of its merger with Time Warner. Federal officials said AOL must open the system — but only when it starts offering advanced broadband services on it, like video.
"AOL is obviously a consumer company, and the goal is to leverage that core asset," said Fred Singer, senior vice president at AOL interactive services. He added that AOL recently launched a service geared to small businesses through its Netscape subsidiary, but that is viewed as an extension of the consumer service. "Their needs are exactly the same as in the consumer space."
According to another AOL source, who asked not to be identified, "We are having to look very closely at what the Microsoft move means to us."
The lack of openness and security has led some partners away from AOL. While it considered working with AOL on an IM-based service for financial institutions, Reuters decided AIM "doesnt satisfy the concerns of the world financial community," according to Lewis Knopf, the companys executive vice president of information development and operations. Reuters is using Microsofts HailStorm technology instead.
"If you open up your platform so developers can write widgets that would plug into your client, you could see video chat, notification of stock changes, news services," said IDC analyst Barry Parr. "But that shifts the game to one Microsoft is better at, which is courting developers. AOL has done exactly the opposite."
Open standards are under development by the Internet Engineering Task Force, which is considering two competing protocols: the Session Initiation Protocol for Instant Messaging and Presence Leverage Extensions (Simple), and the Instant Messaging eXchange Protocol.
There have been several interoperability trials to see if IM applications work with other presence platforms. Jonathan Rosenberg, chief scientist at Dynamicsoft, which provides a communications platform that allows developers to write voice and data applications, has participated. He said hes never seen AOL in attendance at the Simple demonstrations, while Microsoft has been an active participant.
"AOL has behaved very Microsoftian in terms of interoperability," Latham said.
AOLs small-business play is through a Netscape project called NetBusiness. AOL is setting up templates for customers to design and operate e-business Web sites, using the Netscape back end. Instant messaging is part of that program. It would enable a customer to create a "buddy list" of its customers and suppliers so it could make deals using IM.