AOL loses chief instant messaging executive

Chamath Palihapitiya to leave AOL at month's end

The top official at the helm of America Online Inc.'s (AOL's) instant messaging services has resigned, leaving a void in what is one of the company's most successful and most important units.

Chamath Palihapitiya leaves AOL at the end of this month, about one year after becoming vice president and general manager of AIM and ICQ, an AOL spokeswoman said.

He starts his new job in January as principal with Mayfield Fund, a venture capital firm in Menlo Park, California, where he will focus on investments in the consumer Internet sector, a Mayfield spokesman said.

During his year-long tenure, Palihapitiya oversaw significant improvements to the IM services, particularly AIM, which got a major overhaul under his watch.

He also inherited a strategy of developing the IM (instant message) services into broad communications hubs with ever-improving voice and video capabilities and with tools for sharing photos and other content, playing online games and publishing blogs.

"If you're going to live up to the potential to be a great communications platform, you have to do other things beyond IM," he told IDG News Service earlier this year.

While this is a vision also shared by IM competitors such as Microsoft Corp. and Yahoo Inc., Palihapitiya made sure AOL continued to execute on it. This was key to expanding the user base and retaining AIM's top spot in the consumer IM market during his stint.

AIM and ICQ combined are bigger in terms of accounts than Yahoo Messenger and MSN Messenger combined, according to market researchers The Radicati Group Inc.

AIM will finish 2005 once again as the worldwide market leader in consumer IM accounts with 30 percent, or 244 million, followed by ICQ with 26 percent, or 213 million, according to a forecast made by Radicati in the third quarter.

MSN Messenger is expected to follow close behind in third place with 25 percent, or 205 million, while Yahoo Messenger comes in fourth with 19 percent, or 156 million.

AIM has become increasingly important to AOL, particularly as the company becomes a full-fledged, freely available portal like Yahoo supported by online ads, and moves away from its old model of being a fee-based subscription service.

In this new strategy, AIM plays a big role in introducing users to existing and new AOL services, acting as a motor that pumps traffic throughout all AOL sites.

Palihapitiya leaves AOL with a well-defined vision for AIM and ICQ, so it will be up to his successor and the team to follow through on the pieces that haven't been developed yet, an analyst said.

"He has left a very clear blueprint. Certainly there’s more to be done with IM but the vision is very clear on where IM belongs within these portal companies: as a key communications layer," said Allen Weiner, a Gartner Inc. analyst. "For AIM, now it's about execution."

Palihapitiya worked at AOL for about six years. Before his current role, he was vice president of business operations for the AOL Broadband subscription service. There he defined and implemented AOL Broadband’s strategy across all functional areas, according to his official AOL biography sketch.

He was also at one point executive director of product strategy for AOL Entertainment, where, among other things, he oversaw the launch of Radio@AOL and MusicNet on AOL.

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