SAN FRANCISCO (01/04/2000) - While giants America Online Inc., AT&T Corp. and Microsoft Corp. wage war over instant messaging, smaller skirmishes among companies promising next-generation chat software have gone largely unnoticed.
Now two Net upstarts are vying for industry position with dueling partnership and funding announcements.
Cahoots and Multimate.net allow visitors to the same Web site to trade messages about the content they are reading or the merchandise they want to buy. The chat services are designed to provide instant feedback and community content for any site. By contrast, most chat services right now require that people chatting already know each other.
Multimate.net recently announced that its Instant Rendezvous chat client will be integrated into the offerings of CommTouch, which provides e-mail services to more than 70,000 Web sites. The pact means that the software will work seamlessly on some of the world's top Web destinations, including those offered by the Discovery Channel, Excite, Warner Bros. and Ziff-Davis.
Meanwhile, Cahoots recently made official that it closed a $17 million first round of venture funding from Sevin Rosen Funds, New Enterprise Associates, Walden International Investment Group and other backers. Brisbane, Calif.-based Cahoots is still keeping specifics about its product under wraps, but executives say it will launch early next year.
The two companies have their work cut out for them. The clear leader in the instant messaging market right now is America Online, boasting more than 30 million registered users for its Instant Messenger; ICQ, which AOL acquired last year, claims more than 40 million users.
Other rivals have tried to break AOL's grip on the market. Earlier this year, Microsoft programmed its instant messaging software to work with AOL's. After a protracted game of tit for tat - in which the No. 1 online service would block Microsoft each time it found a way to let its messenger interoperate with AOL's - the software giant recently abandoned the practice. In addition, AT&T entered the fray just last month, announcing it would design its instant messenger to work with AOL's client. America Online vowed to block the move.
But the chat upstarts say the behemoths are failing to fix a fundamental flaw in the way messaging services are currently offered. "The Web today as a promising place to interact with people is unfulfilled," says Cahoots President John Rizzo. "If you go shopping on the Web, it's like a mall with no patrons and no sales clerks." That's because people browsing Amazon.com have no way of interacting with others the way shoppers in a brick-and-mortar bookstore can.
(America Online says it is working on adding this type of functionality to its software.) Rather than play copycat, the new breed of chat challengers is taking a different tack in trying to outdo the stalwarts. Pointing to the separation between application and Web browser, Multimate, Cahoots and competitors Gooey and Odigo all allow people viewing the same Web page to exchange real-time messages about the content. Readers of a New York Times editorial, for instance, could immediately share views about the piece, creating extra traffic on the Times' Web site. Similarly, shoppers hunting for bargains on eToys could query other shoppers or a clerk about the quality of a particular product, or whether it is available with an extended warranty.
In addition to building community and increasing traffic, some of the products can be customized to meet the specific needs of particular Web sites. For example, sites can build a cobranded version of Multimate's Instant Rendezvous to emphasize special departments and channels. So far, music community Thedigs.com, Japanese portal iJapan.com and NursingLife, a portal for nurses, have signed on as partners. Multimate will be charging cobranded customers a $2,000 setup fee and between $100 and $1,000 based on the average number of visitors using Instant Rendezvous. Cahoots declined to discuss its revenue plans.
But Multimate and Cahoots face daunting challenges. Gooey already claims 350,000 registered users and partnerships with CNET, NBCi and Theglobe.com. The next-generation chat service is also expected to announce a cobranding and distribution deal with music site Tunes.com.
More important, though, the upstarts are likely to find themselves outdone. As Netscape learned years ago, there's nothing preventing AOL, AT&T and Microsoft from adding new features to their existing chat software. With AOL's messaging already a de facto standard, getting the masses to switch will be a big hurdle.