Yahoo, Microsoft join IM hands

Beginning in the second quarter of 2006, customers of Yahoo Messenger or MSN Messenger programs will be able to exchange instant messages, see the presence of their contacts, share emoticons, add friends from either service and make PC-to-PC voice calls, Yahoo and Microsoft said Wednesday.

The companies had been in talks "with multiple partners for years," with Microsoft and Yahoo in "discussions in earnest for a year," Dan Rosensweig, Yahoo's chief operating officer, said in a question-and-answer session with journalists. "We've always wanted to do this," he said. "Both of us saw the benefits for consumers."

Asked why it took them so long to come to an agreement on how to solve what has become a headache for many instant-messaging users with friends on different IM platforms, Rosensweig said: "On a spiritual level, we feel like we're coming at this early."

He said the two companies wouldn't snub attempts by America Online's AIM or Google to interoperate, but Yahoo and Microsoft need to focus on getting the technical difficulties solved by combining their two networks first. "Our goal is to make it seamless and easy for users," he added.

Multiprotocol IM clients like Trillian and Fire seem seamless enough for many users, enabling them to use several instant-message programs under one interface. But Yahoo and MSN have tried to wall out third-party integrators, calling their moves pre-emptive measures against IM spam, or spim.

The agreement between Yahoo and MSN is limited in scope to core features and voice only between PCs. "Right now, this agreement does not contemplate voice other than PC-to-PC voice, but as we roll this out," outbound calling will be considered, Rosensweig said.

AIM dominates the instant-messaging arena in the United States, with 51.5 million users in September, compared with MSN's 27.3 million and Yahoo's 21.9 million, according to research firm Nielsen/NetRatings.

According to ComScore Media Metrix figures for August, AOL had 49.2 million users in the U.S., followed by MSN with 24.4 million and Yahoo with 22 million. Worldwide, MSN led with 185 million, followed by Yahoo with 82.1 million and AOL with 61.2 million, ComScore figures show.

MSN and Yahoo dominate instant messaging outside the U.S., said Blake Irving, corporate vice president of MSN Communications Service and Member Platform Group, though he could not provide market share or exact numbers.

Yahoo and Microsoft said the combined customer base for their two programs worldwide is about 275 million.

While all three companies have worked together in the past, most of the progress toward interoperability has been on the corporate side.

Search giant Google also has entered the IM market.

"In my opinion, the biggest external driver for this announcement must be MSN and Yahoo's mutual need to defend themselves in the long term against Google," John Delaney, an analyst at Ovum, wrote in a research alert. "Google is a relatively recent insurgent in these services, but it is clearly determined to grow its presence there aggressively," Delaney said.

"It's worth noting that AOL's attitude to interoperability in the past has been characterized by reluctance at best and outright hostility at worst," he added.

Calls to AOL seeking comment were not immediately returned.

"We believe this alliance is a defensive move and likely a reaction to the current market share dynamics in which Google continues to gain market share not only in search, but also in e-mail and news," Imran Khan, an analyst at JPMorgan, wrote in a research alert. "Given these dynamics, we believe that it is important for Yahoo and Microsoft to protect their valuable instant-messaging franchises."

Many people have gotten used to a "workaround" for having contacts on multiple IM platforms, like simply having them all running on the desktop simultaneously, JupiterResearch analyst David Card said.

"I'm sure the overlap of audience in the U.S. is high," he said in an interview. "This could have more of an impact outside the U.S."

The move could also put more pressure on AOL to open up its IM platform, Card said. As for Google, it isn't a real factor yet because they don't have many IM users, he said. "This isn't about Google; this is about AOL."

CNET News.com's Margaret Kane contributed to this report.