Can Google Change the IM Market?

Analysts have mixed opinions about whether the company is is too late to get traction in this market.

With the launch of Google Talk, its instant messaging and voice service, is hoping to crack the lucrative and fast-growing IM market. But analysts have mixed opinions about whether the company is entering the scene at an excellent time, or is too many beats behind to make a difference.

The difference in viewpoints is driven, in large part, by the fragmentation of the IM market overall. Despite strong leadership from the other three players--America Online Inc., Microsoft Corp. and Yahoo Inc.--a dominant business model that can provide solid monetization has yet to fully emerge.

"Its hard to say whos going to rule because the business models are still fairly new," said David Edwards, an analyst at American Technology Research. "Theres still a lot of development left to go."

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Microsofts MSN Messenger seems to have the most long-range potential for traction, said JupiterResearch analyst Joe Wilcox. "Its the most thought-out strategy," he noted. "Its not the most popular, but Microsoft is the best at focusing on the relationships in IM, and tying it to other activities like blogging."

MSN Messenger could also become the darling of the emerging corporate market, where Microsoft products are firmly entrenched. "Messenger is whats available to many corporate users, and people tend not to switch from what theyre already using," said Nucleus Research analyst Rebecca Wettemann.

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In trying to capture the market, though, Microsoft will have to roll over AOL, which has a majority of the markets subscribers. According to ComScore Networks, AOL has 41.6 million subscribers for AIM, compared to Yahoos 19.1 million and MSNs 14.1 million. It has strength in its business model simply by being the most popular, said Edwards. AOL also has traction with different industries, he added. For example, most of the financial services community uses AIM.

Yahoo, by comparison, could woo more fans with its entertainment-related ties to its IM service, said Wilcox.

Although Google Inc. has only just entered the IM market, it does have a distinctive model, said Edwards. "Google has clarity about its goals," he said. "It should have success in building a user base from its community."

Where Google might have a chance in pulling ahead of its competitors is if it blends search capability to its IM and voice offerings, Wilcox noted.

"Most interesting is the voice aspect of Google Talk, and whether the company will introduce a way to create searchable voice conversations," said Wilcox. "That would be a killer app. It would be huge with the VoIP market."

As the IM players, once a trio and now a quartet, introduce more features in their IM and voice services, the battle for market dominance could benefit users, observed Wettemann, who compared IM and voice developments to the browser wars seen during the early Internet days.

"With Google jumping in, it could be the next Netscape, pushing Microsoft to get ahead of competitors development cycles," said Wettemann.

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