The future of instant messaging

Reuters' IM boss David Gurle says instant messaging could turn MSN, Yahoo and AOL into the equivalent of phone companies.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
6 min read
David Gurle must like navigating though minefields.

As the head of collaboration services for Reuters, the former Microsoft executive is trying to turn the Reuters Messaging service into a test bed for connecting rival instant messaging services. Since joining Reuters in April 2003, Gurle has struck agreements to connect with America Online's AOL Instant Messenger and ICQ services. Earlier this week, he signed a deal with IBM's Lotus Sametime service.

Reuters is also talking over similar deals involving Yahoo Messenger and Microsoft's MSN Messenger, according to sources, though Gurle declined to confirm the negotiations.

But in the contentious world of instant messaging, getting giants such as AOL, MSN and Yahoo to play ball is no small feat. All three remain closed networks to one another, and the issue of interoperability is a topic of avoidance for all three.

Still, the issues behind IM may be an easier sell to corporate clients. While it remains unclear whether Reuters shares revenue with its IM partners, it clearly takes some heavy incentives to convince folks like AOL to open their networks to third parties.

In a phone interview during the peak of Hurricane Isabel, Gurle spoke with CNET News.com about the complexities of getting IM operators to one day connect their networks to each other.

Q: In February you said IM service providers like AOL, MSN and Yahoo will see their power wane as IT managers demand corporate versions of their software. Do you still believe that? It doesn't seem like IT managers are jumping to buy enterprise-class IM.
A: There is a clear need for connectivity for the financial industry, and today that connectivity is impossible because of the fragmented market around IM. That creates a significant demand from us for customers saying, "Solve that problem for us. We need that connectivity and reach. We understand the value of presence and of IM. We want to adopt it but we can't."

That basically creates a foundation which we can take and bring to AOL and say, "AOL, here's the problem we can solve, and here's what the market is ready to bear."

Is there currently a business for AOL, MSN and Yahoo to let their consumer IM products chat with each other?
At this time I don't think so. On the consumer side it's not very hard to load two or three or four different clients on your computer. There is a hassle, but it's not big. Then you have people who are really having a hassle using Trillian and others. The pressure from consumers is not very high at this time.

From the consumer perspective, nobody has proven that there is a moneymaking opportunity by making two or three networks connect. I don't think you or me would pay a couple more bucks to AOL to connect with MSN buddies today. We would rather load an MSN client and an AOL client and not pay for it.

Then where is IM going? Will it remain a service with millions of loyal users and no way to make money off them?
The biggest observation I've had in the last two or three months is that IM is the perfect disruptive technology to telecom providers. If you look at current telecom providers, none of them have the end users' identity like MSN, AIM and Yahoo do. If you look at what's going on in the addressing schema for the end user, it's going to be their identity and not their phone number that matters because of the penetration of broadband and Internet into homes.

In a sense they are the future local exchange carriers. That will create the connectivity requirements. The more value-added services on these respective networks, the more there will be a need for connectivity because it will become essential for people's lives.

You're saying that AOL, MSN and Yahoo will become phone companies?
Yes. I'm saying that Microsoft, AOL and Yahoo will become the equivalent of phone companies of the future, and with a reach that will go beyond their reach today. That reach will be global and without boundaries. With phone carriers, they can only go where the wire goes.

Can they make money like the phone companies?
I think the next thing that will happen is they will bundle their value-added communications services with the Internet access businesses.

Let's say I'm using Comcast. AOL tomorrow comes up with a $25 Internet access charge on top of Comcast's $40 and bundles high-

IM is the perfect disruptive technology to telecom providers.
quality phone, voice mail, videoconferencing with IM connectivity to MSN and Yahoo and anyone else. They store my photos; they host my Web site; and they create a very compelling tool for me. Then they start getting into business because they've aggregated different needs into one package. If everything is being packaged well, and integrated into real-time communication needs, you get a powerful bundle and served to a nice broadband pipe.

Here you see why there needs to be connectivity agreements between AOL and MSN. This is what I mean about next-generation phone companies. This is what AOL, MSN and Yahoo have in their hands and have not fully grasped.

How are they going to figure out the business of connecting their IM services?
It's fair to assume that one possibility among (AOL, MSN and Yahoo) could be that for each person who connects one service to another, they charge each other x cents per user per month or per minute. So it is like compensation between banks when you write checks. You can imagine the same kind of clearing mechanism being built for compensating each other.

Which of the big three are pushing for this to happen?
None are pushing it among themselves. I know AOL and MSN are pushing very hard to get business-to-consumer connectivity agreements in place. Yahoo is setting up a program for connectivity, but it's not widely publicized. To the best of my knowledge, none of them are trying to do anything among themselves, the reason being they are still trying to understand the potential for business that they can drive from user base.

Reuters Messenger is based on Microsoft's Office Live Communications Server, yet you struck a deal with AOL. Is Reuters the testing ground for AOL and Microsoft to interoperate?
It's an earlier version of Office Live Communications Server that Microsoft released back in August 2002. It's been functionally tailored to the needs of Reuters Messaging service.

I think it's fair to say technically we are going to prove that the connectivity can work. It's like we're connecting two highways and engineers from both sides, and (AOL and MSN) can understand the specifications of the highways. We're going to be able to provide that solution and prove that it works.

With all these connectivity deals, is Reuters Messenger becoming another Trillian?
Our connectivity model is on the server layer. We have one client that connects to the data center, and then our data center fans out

Microsoft, AOL and Yahoo will become the equivalent of phone companies of the future.
the appropriate protocols to the right service provider. Say we have a Reuters Messenger user and an AIM and two users want to connect. Reuters Messenger sends an IM message; the message is sent to our data center; our data center detects that it's receiving an AIM user and then it will route the message to the gateway--which connects with the AIM data center. It is a total server-to-server infrastructure, as opposed to Trillian, where it aggregates many clients into one interface.

Will you allow Reuters to connect AIM and MSN?
When we have MSN connectivity, yes. But we haven't yet announced that.

Why is IM important for financial brokers?
It's a very complementary tool for voice. It provides data elements for voice. Voice has limitations. You have to tell a story and it takes time. Brokers love the fact that IM can push something to you, you see it and it gives value. It helps them to make more deals than they could with existing communications tools. They can do it faster with IM than with forms.

Microsoft thinks the potential for IM is voice over IP. Do you agree?
From an adoption and deployment perspective, I think Microsoft is getting ahead of itself. Corporate deployment cycles are incredibly complex. It's unlikely that big corporations will embrace every element of Microsoft in that strategy.