Going after the desktop:all AOL, all the time?
The online giant hopes‘persistence' will pay off
By Thomas E. WeberTHE WALL STREET JOURNAL
Unless you're a college student or a professional techie, you probably haven't heard of ICQ. But the obscure software package may be America Online Inc.'s ticket to dominating the Internet in the coming years. ICQ (for "I seek you") is a sophisticated instant-message system that can link individual users in a real-time dialogue via the Internet.
IT CAN ALERT YOU when designated friends are online and let you chat, transfer files or play games — all while other applications are running on your PC. It can search out users with similar interests and even send and receive voice messages.
Better still, ICQ pops up on your screen before any other browsers or portals to occupy the most hotly coveted real estate in business right now: the first thing you see when you turn on your PC. AOL purchased Mirabilis Ltd., the company that created ICQ, for $300 million in June and, along with it, access to ICQ's 28 million users world-wide, many of them just the kind of savvy, sophisticated techies who have avoided AOL before.
With 16 million members paying monthly fees, AOL's flagship service far outpaces its closest competitors, MindSpring Enterprises Inc. and EarthLink Network Inc., which each boast about one million members. AOL earned $91.8 million on $2.6 billion in revenue in its most recent fiscal year, making it one of the few big profitable Internet ventures, and with its acquisition of Netscape Communications Corp., made final this week, it has solidified its dominance of cyberspace.
But the business is fast changing. As online advertising and electronic commerce emerge as the hottest areas for making money on the Web, the number of members has become less important than the number of viewers. Major portal sites command huge audiences that beam in from all sorts of services, including AOL, and here the race is much closer. AOL still boasts the biggest audience, with nearly 38 million unique visitors to its various online properties in January, according to ratings compiled by Media Metrix Inc. But Microsoft Corp., in the No. 2 spot, enjoyed an audience of more than 30 million, and Yahoo! Inc. trailed closely behind at 29 million. While portal sites don't collect monthly fees, they make money from advertising and, in some cases, merchandise sales.
To stay ahead in the battle for visitors, AOL needs to fend off the portals and find a way to tap Internet users connecting from rival Internet service providers. Solving this riddle could give AOL a crucial advantage if consumers flock to high-speed "broadband" connections from cable-modem services like At Home Corp. or telephone companies selling Digital Subscriber Line access. Both provide lightning-quick access to the Internet.
ICQ is at the vanguard of AOL's strategy. The first version was created by several Israeli programmers, who formed Mirabilis in 1996. The programmers gave ICQ away free on the Web, where it quickly created a buzz and commanded a devoted following.
Even better for AOL's purposes, ICQ's small, rectangular screen, which stays on users' monitors for hours at a stretch, is a potentially explosive marketing vehicle for everything from electronic shopping and advertising to Internet telephone calls.
ICQ is what Web types call "persistent": It becomes active as soon as you turn on your PC and stays there until you turn it off — so the ICQ message box stares out at millions of Net users for hours each day. Because ICQ appears automatically as the first thing on the screen, even before users reach an Internet portal site or activate a browser, it gives AOL a way to bump portals and browsers out of that critical starting-point role.
That virtue explains why "persistence" is rapidly gaining a place next to "stickiness" in the pantheon of Internet buzzwords. Because it is always there, ICQ commands frequent, sticky usage.
"ICQ averages well over an hour a day of usage, instead of minutes for most of the Web portals," says Robert Pittman, AOL's president. "It's persistent, it's always there, it goes along with you."
Whether persistence translates to profits remains to be seen. AOL must tread carefully in commercializing ICQ or risk alienating millions of users. Right now, ICQ software is available free to all Internet users at www.icq.com. The ICQ service doesn't carry ads, although a search feature AOL is testing does.
Competitors are lurking. Microsoft is readying its own instant-messaging salvo with a plan to build chat functions into its Hotmail free electronic-mail service. Yahoo offers a program similar to ICQ called Yahoo Pager.
Still, ICQ is by far the biggest player in instant messaging, and it may soon get bigger. People familiar with AOL's plans say the company is planning to build a connection between ICQ and Instant Message, the lower-tech real-time messaging system built into AOL's flagship service. Such a link would let ICQ's 28 million users and AOL's 16 million members talk to each other. Mr. Pittman says no decision has been made.
If AOL can successfully keep users devoted to ICQ, it could change the way legions of Web users surf. In a new test version of ICQ that AOL started making available a few weeks ago, the company has gone beyond the basic chat functions with a feature aimed straight at the portal companies — a box labeled "Search."
Instead of taking you to Yahoo or Lycos, the search box on the test version sends you to ICQ's search engine, ICQ iT!, where AOL displays paid ads and spotlights merchant partners, just as the heavily trafficked portals do. Users of the new version also can do the following: send and read e-mail; send electronic greeting cards; find other users with similar interests; and track contacts through an electronic address book.
Perhaps most startling, ICQ users can now send and receive voice messages and even engage in real-time telephone conversations carried over the Internet. Some industry executives believe that AOL could one day use ICQ to create its own Internet telephone service.
Cumbersome software and poor, scratchy sound quality has kept Internet telephony a niche market. But that could change, as technology improves and more consumers switch to high-speed, broadband connections, such as those offered by cable-modem companies.
Tom Evslin, chief executive of ITXC Corp., a Princeton, N.J., Internet-telephony company and the former head of AT&T Corp.'s WorldNet Internet service, says ICQ's college-student users could help it make inroads. They are a segment likely to have good Internet access and be willing to sacrifice some sound quality for low-cost telephone calls.
"That makes ICQ sort of a natural place for Internet telephony," Mr. Evslin says. "It's got a critical mass of users."
|
