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AOL's latest goal: ICQ everywhere

The online giant is looking to make the popular messaging client ubiquitous through superior placement on the screen and integrated features.

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Just as a television set sits in a living room or a microwave sits on a kitchen counter, AOL wants its services to sit in the place Netizens go every day--the PC.

And its latest weapon to win the hearts, minds, and eyeballs of Web users around the world? A cute flower that perpetually sits on a Windows menu bar.

Yesterday, the online giant launched the latest test version of ICQ, a popular software client Download ICQ via CNET's special report developed by three 20-something Israelis that allows users to chat and send instant messages to each other. AOL acquired ICQ's parent company Mirabilis in June for $287 million and set out to establish the client as a property in its multibranded portal strategy. The strategy entails incorporating a number of Web brands that AOL manages in order to serve different audiences.

"In the multi-brand version, if AOL is Pepsi, ICQ is Mountain Dew," said ICQ chief operating officer Fred Singer. "It's a separate community. "People who use ICQ don't want to use AOL."

The client has become what ICQ executives termed a "desktop communications portal," which means Web search and aggregated content are now attached to ICQ's instant-messaging and chat foundation. But also in the spirit of portals, the new client will pursue business endeavors that place it in the path of Web heavyweights Yahoo, Excite, Lycos, and Microsoft's MSN.com--such as advertising, commerce, and one-to-one marketing.

However, ICQ has something many portals have pursued with varying degrees of success: location, location, location. Analysts say the placement of ICQ's cartoon "four-o'clock" flower logo on users' PC icon menu bar will be the factor that distinguishes ICQ from other Web properties. It's no coincidence that the icon for the Netscape-AOL Instant Messenger feature resides in that same spot.

"This is one more way for AOL to capture another piece of real estate for whatever occurs in the future," said William Blair equity analyst Abhishek Gami. "It can be used as a platform for communications or commerce."

AOL has consistently touted its intention to make its services consumer-friendly and accessible to the masses. Executives have said the company markets its services as a utility rather than as technology in hopes of attracting a mainstream audience.

"We have a central belief in the company that this is a social medium," said AOL Studios president Ted Leonsis in a speech yesterday at the BancBoston Robertson Stephens Tech '99 conference in San Francisco. "And we want to be more valuable, build this as a medium, make this central and as a utility, make it central in people's life as the telephone and the television, but with more value."

As one testament to making AOL's services seem central to daily life, Leonsis said the company will begin promoting the phrase "Are you there," while giving its signature "You've got mail" a rest.

And one of the keys to AOL's ubiquity has been placement on prime real estate.

AOL in the past has negotiated with PC manufacturers for placement on new machines. AOL had apparently struck a deal with Microsoft to distribute its online service through the Windows operating system in return for choosing the Internet Explorer browser over Netscape Communications' Navigator, according to an AOL executive's testimony during the Justice Department's antitrust suit against Microsoft.

With ICQ, AOL hopes to repeat what it had succeeded in doing in the past with its online service: make it a daily habit for millions of users.

"What Ted's [Leonsis] focusing on is getting [ICQ] installed in the first place and making it an addictive habit for users," Gami added. "Once you have user habits that are hard to break, it becomes a much easier platform to play off of."

Creating a habit begets loyalty, even in the face of problems with the service. A classic example was AOL's ability to continue growing its user base despite facing network outages, the ire of users who disagreed with pop-up ads, and even a $2 price hike on its subscription service.

"Now, if there's 5 percent of the service you don't like but 95 percent you like, will you keep it around?" said Gami. "Of course. It's a no-brainer, because AOL more than anyone else in the world understands that their entire power is in the network--a network of people."

And with its already monstrous user base, there is much AOL can do to ensure ICQ's success.

The launch is AOL's first attempt to not only beef up ICQ, but also to introduce a revenue stream into the client--something ICQ has lacked since its inception. Before yesterday's launch, ICQ was focused only on registering as many users as possible, instead of pursuing advertising or e-commerce partnerships--two revenue cornerstones for Web companies.

But the gold mine for AOL is clearly the registration base. User registrations give Web companies data about behavior patterns such as content viewing and commerce preferences. With a large registration base, Web companies can offer users targeted advertisements from commerce partners.

"Once you learn information about people, you can sell advertising against it aggressively," said Gami.

Moreover, the client could go deeper into marketing products to its users, Gami added. For example, he said AOL could enable the client to send direct marketing messages to users who choose to accept them.

"Consider the opportunity to use ICQ as a pro-active consumer marketing tool," he suggested. "What if all of a sudden you get messages via ICQ from some commerce company? It sounds almost horrible, but shoot, I think it can work that way."

ICQ has registered 28 million users, and has become one of the most popular software downloads on the Web. ICQ also garnered a young, international, and loyal audience base--very different from AOL's demographic, according to analysts.

However, AOL still treads a fine line, and will have to take careful steps if it decides to integrate ICQ users and AOL users. Though it makes sense from a numbers perspective for AOL to leverage both user bases, any premature integration could lead to backlash, according to Jupiter Communications analyst Anya Sacharow.

"With ICQ, AOL is going after building a user base and a demographic that it's not addressing," she said. "It's a tricky position for AOL because they can't put the AOL brand near ICQ. They have to maintain the brands separately."

Nevertheless, integration may be imminent. Since the acquisition, AOL has been integrating ICQ's technology onto its platform. And now that the companies are running off a common infrastructure, will the two audiences begin talking to each other?

"ICQ users have not noticed a difference in their service, but the reality is that it's all backed by AOL," said Gami. "The next thing that AOL could change without anyone knowing about it is the database, and create a link between the ICQ database and the AOL database."

However, Gami also added that integration between the two audiences may not necessarily spell disaster. Rather, it could increase the popularity of online communication.

"If you really hate AOL, you don't put [its users] on your [buddy] list and don't let them put you on their list," he said. I think that while some people may gripe, the reality is the vast majority will say, 'Great, I can communicate with more people now.'"

ICQ 99 is available at CNET Download.com.

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