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AOL's remixed Messenger

IM chief Chamath Palihapitiya explains how free e-mail fits into the company's plan to be your hub for staying in touch.

AOL Instant Messenger has become an institution for nearly 30 million Americans. But can it ever become a big contributor to the company's bottom line?

That's very much on the mind of the folks who manage Time Warner subsidiary America Online. They want that loyalty to pay off as the Internet service provider seeks to offset declining subscriber rates for its core dial-up service and gain ground on Yahoo, Microsoft and Google.

So on Thursday, AOL activated a free Web-based e-mail account for every customer with an AIM screen name--in effect, a free upgrade for 5.9 users.

The company has also begun to reshape the underlying architecture of AIM, to make it a free communication portal with tools for SMS (short message service), Internet telephony, video chat, instant messaging, file sharing, blogging and now e-mail. That's due this summer.

The stakes are high for AOL. It has lost a growing number of dial-up and broadband subscribers, and it is fiercely trying to be a part of an online advertising resurgence that has lifted Google and Yahoo to astonishing heights.

CNET talked to Chamath Palihapitiya, vice president and general manager of AIM and ICQ, on the eve of the AIM Mail launch.

Q:How does broadband--especially as you just were a vice president at AOL for broadband--play into the new instant messaging services?
Palihapitiya: What we've seen is that IM is very much a broadband behavior. And what people really want is a unified communication experience. They're looking for a service that can do e-mail, IM, SMS, video, voice, and there is no one place for it. What AIM is trying to do is live up to that promise.

When we launch the new AIM, we will be the only service that integrates all of those together. We have a huge user base, and our basic message to them is really simple: If you have a screen name, your AIM mailbox is ready for you. All you have to do is activate it.

How can you possibly catch up to established free e-mail services from Hotmail, Yahoo and Gmail?
Palihapitiya: There are two things we're counting on. One is convenience, the other is the feature set. When we did research, people said that they take their screen name and use it when they sign up for free e-mail. We think that by giving people no reason to go and launch a separate service offers a lot of conveniences.

We believe blogging is also part of communicating.

The feature set we're providing is industry leading. We have the best spam and antivirus service for e-mail, because it's the same that we provide to AOL users. (Last year, we cut spam to our users by 75 percent.) The second point is storage. Two gigabytes of storage--that's enough for all users' e-mail needs.

What we've done on top of that is we've added application-like features. So if you're used to (Microsoft) Outlook, with features like drag and drop e-mail to folders, you can do that using our e-mail product. You'll also be able to un-send messages or check the status of e-mail messages, to see if someone has read it. Lastly, we support IMAP (Internet Message Access Protocol, a secure access to third-party e-mail applications), and that allows us to give a rich experience through Outlook.

Are you expecting Google to rival AOL in the IM market?
I don't know.

What's the future of Triton, the instant chat technology you just started testing?
Palihapitiya: Our vision is that AIM can be the ubiquitous communication service for all consumers. It's powerful, it's free, it's robust. It can do everything you need from making a phone call over the PC, to participating in a video chat, to sending a text message to a mobile phone, to receiving an IM, and now, with AIM Mail, send and receive e-mail from your e-mail address.

What we did with Triton--the technology preview of our upcoming AIM product, which we intend to roll out over the summer into the fall--we took the chance to integrate all of these forms of communication and make it part of the core DNA of the client.

It's very modular, and that's AOL's new approach to building applications, this modular application rather than a monolithic approach. It allows us to be more efficient in developing products, and much quicker. And there's more flexibility in the user interface. For example, you can see some animations--it's a shower of smiley faces.

How does blogging fit in?
Palihapitiya: We believe blogging is also part of communicating. You can add a bot to your buddy list so you can update your blog via IM. You can also send a text message via a mobile device to your blog and update it that way.

Basically, when you think about communication on the Internet, we'd like you to think of AIM.

AIM is known for its popularity with young people. Who do you hope to win over with your new services?
Palihapitiya: Our audience has a broad penetration--from ages 13 to 100-plus. Basically, we dominate the under-25 segment. The features we've described, we think speak to the broad base we have. But the convenience of tying your screen name to your e-mail address will be the killer feature for that audience.

And for the older audience, we believe the 2 gigabytes and spam protection and the ability to support IMAP so they can use it at work will be a huge win for them too.

How do you make money from AIM Mail?
Palihapitiya: This is an ad-supported product. You'll see our marketing partners be part of the chrome of the service. The service was built with simple ads in mind, but it can support rich media.

How are marketers responding to the new AIM?
Palihapitiya: When you look at our results, the ad market is healthy, and there's an opportunity for us to participate even more.

With the launch of mail, we think we'll turn up the heat on our rivals.

Right now we're drinking from a fire hose because there's so much interest (in AIM). We've had a tremendous response from advertisers for AIM, because they recognize the difficulty in reaching the under-25 audience. That's why we're so excited, because we think mail will extend that for us.

Betas are popular in the Internet media business as a way to rush new products to market. Is there a danger in that?
Palihapitiya: No, people should be more open. Betas are great. It exposes people to innovation that's happening here. You're never going to be absolutely perfect, so there's a lot of value in exposing it to your user base, because they're loyal and they want to test it. That's something that everyone should be embracing.

Much has been made about e-mail storage capacity competitively--Google's Gmail blew the door off standard rates, then others followed. Why is storage so cheap now?
Palihapitiya: AOL has an existing e-mail service. We've gotten good over the years at scaling and managing a large-scale service, and AIM mail will benefit from that know-how.

Spam has crept into IM. How do you stop it, or prevent it from getting worse?
Palihapitiya: Spam on IM, or "spim," is something we take great pains so that our users don't have to deal with it. The victims of spim have typically been on other networks. The reason is, we've attacked spim the same way we've attacked spam on our network.

We have techniques to monitor messages sent from one account. We have a feature to report IM spam, and we can lock down that offending spimmer.

In the constellation of your rivals--Hotmail, Yahoo and Google--how do you see AOL?
Palihapitiya: With the launch of mail, we think we'll turn up the heat on our rivals. We'll force consumers to ask themselves: 'Do I want a separate IM experience that's not connected to e-mail? And yet another application to do a VoIP call?' It should all be integrated, and we're the only ones that have done it.

As AOL becomes more of a Web operation, doesn't that detract from your subscription AOL service?
Palihapitiya: No, I think we're building a Web audience--because it's a valuable asset to have that, so that we can capture this burgeoning and robust advertising business. But it's not at the expense of our subscription service.

On another front, how will you catch up with the phenomenal success of Skype's voice over IP service, which has more than 30 million users so far?
Here is the perfect example. A consumer who already has, on average, 150 people to 200 people on their buddy list--we're increasing this to 250 in this version and by the time of (full release) it will be 400 buddies--it's as simple as clicking on that name and hitting call.

With other applications, you have to call on the landline, etc. With VoIP integration into AIM, I just click on your name, and you and I are talking in seconds.

Why do you think IM is so promising or the best vehicle for combining all these services?
Palihapitiya: IM is so promising because it's the doorway for all the other forms of communication. If people are loyal to AIM, and it can be more things like e-mail and blogging, then we become your doorway to communicate.

People don't give us credit for this, but AIM is really part of popular culture, it's something we should all celebrate.