Yahoo and MSN IM tie up: Earthquake or tremor?

Behind the bluster, the concrete benefits for users are as yet unclear

It's not hyperbole to describe as historic Wednesday's announcement that Microsoft Corp. and Yahoo Inc. plan to partly link their respective consumer instant messaging (IM) services. However, it's unclear just how many concrete benefits the plan will yield for users.

Lack of interoperability in the consumer IM market has been for years a major inconvenience for users, forcing them to sign up to multiple services, each with its own interface. Some third-party applications lessen the problem but don't truly solve it.

As the first interoperability agreement among two of the three major consumer IM providers, Wednesday's Yahoo-Microsoft announcement is likely to be remembered as a turning point: the day when the era of consumer IM interoperability began.

"This is a significant step forward for consumer IM. When you look at the usefulness of IM, it's important to have that interoperability. Right now you have all these little islands of IM. Interoperability has been sorely lacking, and that tends to limit the usefulness of IM," said Michael Osterman, president of industry analysis company Osterman Research Inc.

Still, as much as they herald a fundamental change in the way consumer IM is provided, the converged capabilities that Yahoo and Microsoft plan to deliver in the second quarter of 2006 will not by themselves significantly ease interoperability problems.

In other words, the convergence Yahoo and Microsoft will provide next year will not erase the need for users to be in multiple IM networks or the need for applications such as Cerulean Studios' Trillian, which consolidate contacts from different IM services in a single interface but don't truly enable interoperability.

One point that has been overlooked in the wake of the announcement is that Microsoft and Yahoo aren't committing themselves to making their IM networks broadly interoperable. The vendors' commitment is for their users to be able to exchange text messages, do PC-to-PC voice communication, share some emoticons and merge contact information.

This means that the planned interoperability will fall short for MSN Messenger and Yahoo Messenger users who routinely use IM for other activities, such as sharing photos, sending files, engaging in Web camera-enabled video conversations, playing online games and accessing the IM networks from mobile devices. For the moment, these features will remain outside of the scope of interoperability.

"Microsoft and Yahoo say they are doing this to give consumers what they want, but I think if you ask consumers they would say they want interoperability all the way [across the two services]," said Allen Weiner, a Gartner Inc. analyst.

Particularly after users get that first taste of interoperability next year, Microsoft and Yahoo can expect users to really raise their voices in calling for further convergence, said Matt Anderson, an analyst from The Radicati Group Inc.

Capabilities such as photo sharing and file transfer "have become standard features on IM clients and will have to become interoperable for customers to be truly satisfied," Anderson said.

It's unclear whether Microsoft and Yahoo even want to enable broad interoperability among their IM networks, since they must maintain some way to differentiate themselves in order to retain their users, Osterman said. "When you allow total integration and true interoperability between two IM clients, their distinctiveness goes away," he said.

Osterman prefers to view the glass as half full in terms of what Microsoft and Yahoo will deliver, saying that while it would be nice for users to have complete interoperability across all features of both services, "just doing text messaging back and forth will go a long way to satisfy market demand."

Weiner suggests the main reason behind this move isn't really to make users happy, since users have been requesting interoperability for years. Rather, Yahoo and Microsoft may be trying to cut off any chance of Google Inc. becoming a serious player in consumer IM.

Google, which has become a true nightmare for Microsoft and Yahoo, launched its consumer IM service Google Talk in August and currently has less than 1 percent of worldwide accounts, according to Radicati. But Yahoo and Microsoft know Google can quickly become a danger to them in consumer IM, as it has in other areas, Weiner said. Google based its service on the open XMPP (Extensible Messaging and Presence Protocol) framework and wants to foster interoperability across the consumer IM industry.

"This combo is all about Google. This is a move to preempt Google from becoming a power in IM. Google is new and starting from zero, but because of its power, it poses a threat," Weiner said. "By combining forces, Yahoo and MSN create such a powerful entity that it will be significantly challenging for Google to make inroads."

John Delaney, an Ovum Ltd. analyst, shares this view. "The biggest external driver for this announcement must be MSN and Yahoo's mutual need to defend themselves in the long term against Google," he wrote in a research note after Wednesday's announcement. "By combining their IM user bases, MSN and Yahoo 'raise the bar' that Google would need to clear to establish dominance as an IM provider, to a very high level."

Another reason why users are unlikely to see a dramatic change is that America Online Inc., the leader in the consumer IM market, is notably absent from this agreement. That means users will need to continue to connect independently to its AIM and ICQ services.

AOL's muscle is impressive. AIM and ICQ combined are bigger in terms of accounts than Yahoo Messenger and MSN Messenger combined, according to Radicati.

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.

"If your friend is on AOL, and you want to IM with that friend, then you need to be on AOL too. The interoperability between MSN and Yahoo will not change that. Both MSN and Yahoo acknowledge that their users would like interoperability with AOL, but there are no public plans for that at present," Delaney wrote.

The tie-up doesn't really threaten AOL nor forces it to open up its network, particularly because everyone who has a Yahoo Messenger or MSN Messenger account probably also has an AIM account, wrote David Card, a Jupiter Research analyst, in his Web log.

Microsoft and Yahoo to link IM networks, Oct. 12, 2005

Copyright © 2005 IDG Communications, Inc.

InfoWorld Technology of the Year Awards 2023. Now open for entries!