Microsoft and Yahoo! in IM and VoIP deal

12 Oct 2005

Microsoft and Yahoo! are preparing to link their free instant messaging (IM) services to take on both market leader AOL and newcomer Google. Industry observers suggest that the link-up could also lead to the ability for users to communicate via voice over internet protocol (VoIP), a move that could have powerful ramifications for the traditional telecoms industry.

The tie-up, expected to be announced later today, is the first major alliance between two of the web’s main providers of instant messaging and will allow users of Microsoft’s MSN Messenger service and Yahoo! Messenger to swap instantaneous text messages with each other.

It will also give users of both services the ability to communicate via voice as well, a feature that until now has been restricted to users within each service.

Time Warner subsidiary AOL is currently the market leader in the IM space with a 56pc market share. In August, Google launched its own IM service, which includes internet voice calling, in August.

It is understood Microsoft has already opened up its corporate online messaging service, which requires a license and offers more features to AOL and Yahoo!. Unlike free messaging, corporate messaging allows businesses to install IM within corporate networks, where conversations can be monitored and saved, similar to enterprise email.

Another service provider Trillian offers a single programme that allows users to send and receive IM across AOL, MSN, Yahoo! and other service providers if they have an account with each provider. Observers suggest that Google’s Gtalk VoIP service could also be transformed into a multi-protocol client that could work across MSN, Yahoo! and AOL, presenting a formidable opportunity for these players to take on prime movers such as Skype as well as shake up the traditional telecoms industry.

Last week, Microsoft CEO Steve Ballmer was in Dublin and when asked by about his company’s aspirations for the voice business, Ballmer said: “We have voice today in our IM product, the most popular VoIP tool basically in the world today. MSN IM and Skype are the two leaders. We recently did an acquisition of a company that helps augment to do telephone calls from PC. We have put a lot of effort into live communications to incorporate voice communications in corporate networks than traditionally and we do have the largest base of users in the world who we help with communications needs – Hotmail, IM, Outlook and Exchange.

“Nobody helps people communicate more than we do and we have a rich innovation path to add value to voice and video interaction using software, virtual meetings is a whole new area that we are excited about. People are going to have the software to record a meeting, capture the correct person speaking in a meeting, let people watch a meeting if they didn’t attend a meeting – it turns out you can shrink a lot of meetings. We’re a little afraid that if this gets used in college campuses students won’t attend their lectures and watch the compressed form instead. Nonetheless it’s an area of big investment.”

In terms of Microsoft’s future as a communications player, Ballmer said: “We are going to work in conjunction with classic telephone, fixed line and cable companies on this project.”

In related news, Microsoft Ireland said this morning that it has redesigned its homepage in such a way that it will boost users’ online experiences by loading faster.

By John Kennedy