Beginning this week, Abbott Systems will charge customers $29 for its AbbottChat instant messenger software. It also will charge companies and large groups $495 for its chat server. In return, the software comes without advertisements. For the past year, AbbottChat's primary revenue source came from advertising.
The move comes as technology and Net heavyweights such as Microsoft, America Online, and Yahoo are battling for users in the instant message arena. The technology allows users to communicate with each other via text messages that are delivered in real time.
America Online's AOL Instant Messenger (AIM) popularized the software. AIM users communicate in real time with a list of contacts known as "Buddies." AOL has 45 million names on its Buddy List. It also owns instant message service ICQ, which has 40 million registered users.
The instant messaging battle last month became more of a war when Microsoft released its MSN Messenger service. Microsoft's software allowed its users to communicate with AIM "buddies." AOL responded by blocking access to its members; it also accused Microsoft of hacking into its servers to offer communication with AIM users.
Observers say instant messaging has taken off largely because it's free; it remains to be seen whether users will pay for it simply to be rid of advertising. By contrast, free Internet access services that are paid for with advertising--a business model that failed a few years ago--is making a comeback. AltaVista recently began offering a free Internet access service, for example.
Soon after launching AbbottChat, Abbott Systems discovered that giving the software away for free was more difficult than the company expected. It turned out that selling advertising space on the software became a business of slim margins and steadily decreasing returns.
"The cost of advertising is dropping dramatically, and potential advertisers are paying less and less," said Abbott. "You're caught between a rock and a hard place."