America Online (AOL) and Microsoft are heading for a showdown over Internet instant messaging technology, as the service becomes increasingly important to business users, according to research and consulting company Gartner Group, which released a new study on the subject on Tuesday.
"We think (instant messaging) is a very underutilised tool for real-time communication," said Gartner analyst Neil MacDonald. "Secondly, on mobile phones, we think that instant messaging -- whether you use SMS (short message service) or whether you can actually tap into AOL instant messaging on your mobile phone, is going to be the killer application for wireless."
Services such as stock transactions via instant messaging are currently in an "embryonic phase," he said, but "we are on the verge of a flood of new applications using instant messaging."
AOL and Microsoft divide between themselves the lion's share of instant messaging customers, MacDonald said. Fifty-two percent of consumers and 40 percent of business users rely on AOL's instant messaging service, while 36 percent of consumers and 40 percent of business users turn to the Microsoft version.
But the tables could turn, MacDonald said, since Microsoft announced its Hailstorm Net-services strategy last month, which will bundle its Passport single-sign-on service, including instant messaging, with the forthcoming Windows XP operating system.
"That will create a community of Passport users which will over time be larger than the number of AOL users. It's another potential browser war," he said, referring to the extended court battle over Microsoft's bundling of its Internet browser with Windows software.
The consultants are predicting that the battle between the rival instant messaging technologies will come to a climax by 2003, resulting in either a marketing and technology deal between AOL and Microsoft, or in one of the two companies being effectively eliminated from the instant messaging market.
"This isn't about technology -- Microsoft instant messaging is pretty good, AOL is good enough -- it's about the community of users that are available to you. What MS wants to do is get control of that community."
Microsoft, said Gartner, "holds the upper hand in terms of Web services technology," but the giant software company "has issues with public perception in terms of trust and reliability." Users may be reluctant to trust Microsoft with sensitive information transmitted via instant messaging.
The study also analyzed other competitors offering instant messaging products, including Yahoo Inc., Jabber.com Inc., Lotus Development Corp., and Novell Inc.; but since AOL and Microsoft between them control between 85 and 90 percent of the market, the others are relatively insignificant, said MacDonald.
"It's a battle of the titans," he said.