ONE FOOL'S OPINION

Lycos, AOL AIMs the Same

By Dave Marino-Nachison (TMF Braden)
October 6, 1999

Anyone else remember the field day the media had with the short-lived public tiff between Internet services powerhouse America Online (NYSE: AOL) and Microsoft (Nasdaq: MSFT) over the software giant's efforts to hack its way into AOL's network of instant messaging users without the "You've Got Mail" maven's permission?

"Boy, talk about a story that died," exclaimed Matt (TMF Verve) Richey, who follows Microsoft and other top-notch value producers for our Rule Maker portfolio. In short, Microsoft had launched MS Messenger and made it compatible with AOL's Instant Messenger (AIM) software, meaning MS users could communicate with people on AOL's system as well as its own, without AOL's OK.

Today seemed like a good time to check up on the progress of Bill Gates' money machine before writing another column on instant messaging, because ever since the open source flap spread its wings some two months ago, there hasn't been much noise out of Redmond, Washington.

That certainly hasn't been the case in Reston, Virginia.

In a story the Fool wrote about the Microsoft-AOL imbroglio in early August, we noted that AOL was busy crafting alliances to broaden the reach of its software. AOL's not only working on instant messaging products for Apple Computer's (Nasdaq: AAPL) Macintosh flock but for users of rival Internet service providers (ISPs) EarthLink Network (Nasdaq: ELNK) and MindSpring Enterprises (Nasdaq: MSPG) -- which, it should be noted, agreed to merge into the country's second-largest ISP late last month.

Today, AOL stepped up its efforts to bring AIM to the masses, announcing an agreement to provide a co-branded version of the software for Lycos (Nasdaq: LCOS) beginning in December while the portal operator develops a customized version.

And there could conceivably be even greater opportunity afoot for AOL in months to come with the future of Excite@Home (Nasdaq: ATHM) up in the air.

Apparently AOL isn't as stingy with its instant messaging technology as Microsoft wanted us to think (for more on this notion check out this article from the pen of the Fool's Paul Larson).

Of course, there are still plenty of Internet users that fall outside the AIM umbrella -- notably those who prefer MS Messenger and Yahoo! (Nasdaq: YHOO) Messenger -- but it appears AOL will gladly provide AIM technology to its competitors that are convinced it's what their users demand.

Legal issues aside, what should investors make of this? With AIM software a free download, it's not as if AOL makes money directly from its propagation per se. But as Internet users choose their access and content providers as much based on the quality of the services and content offered as on price, every new user is one step, however small, closer to signing up for full service.

And that AOL competitors are willing to co-brand an instant messaging service lends admirable credence to the AIM's dominance among consumers, particularly since it's essentially a billboard for AOL (which, it will be happy to remind you, just launched version 5 of its software this week, soon to be emulating locusts in CD-Rom format everywhere).

As a single guy trying his best to manage the dating scene, I know first hand how difficult it can be to analyze silence -- but that we haven't heard much from Microsoft on this issue since its brief flare-up two months ago could indicate that Microsoft was stabbing in the dark and has been sent back to the drawing board.

Related Links:
AIM Web Page
AOL Message Board
Fool News, 8/18/99: Supporting Free and Open?
Fool News, 8/18/99: Instant Mess

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