Networks and Positive Feedback: Instant Messaging

1
Networks and Positive FeedbackInstant
Messaging

• Eric Parish and James Moynihan

2
Network Effect

• Characterized by positive feedback
• The larger the network, the better the product
  is
• Tends to create winner takes all markets

3
Instant Messaging

• Allows you to communicate with one or more people
  across the Internet
• Uses a client to connect to a network
• The more users on the IM network, the greater the
  value

4
Networks

• AIM 53 million active users
• MSN Messenger 29 million
• Yahoo Messenger 21 million
• ICQ 15 million

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ICQ

• Released in 1996
• Considered the first Instant Messenger
• Accounts assigned with a unique number, new
  accounts are given numbers higher than 300
  million
• Bought by AOL in 1998 for 287 million
• Most users have switched to other networks

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ICQ (Cont.)

• Features
• ICQ 5 includes many new features
• Considered bloatware

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AIM

• Released in 1997
• Uses the same protocol as ICQ
• Allows users to communicate to buddies using
  screen names instead of numbers
• Ad supported

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AIM (Cont.)

• Features
• Away message
• Buddy List
• New versions added voice chat

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Financial Data - AOL

• 2005 Revenue (USD) 43.65B

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MSN Messenger

• First version in July 22, 1999.
• Was designed to work with the AIM network
• AOL changed protocol to prevent third-party
  programs from connecting to their network
• MSN messenger is included with Windows

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MSN (Cont.)

• Features
• Similar to Aim
• Voice
• Video
• Games
• You can send animated files
• Hotmail support

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Financial Data - Microsoft

• 2005 Revenue (USD) 39.79B

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Yahoo Instant Messenger (YIM)

• Released in 1999
• Uses generic yahoo ID which can be used by other
  yahoo services

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YIM (Cont.)

• Features
• Similar to AIM
• Allows access to yahoo chatrooms
• Voice chat
• Check yahoo mail

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Financial Data - Yahoo

• 2005 Revenue (USD) 5.26B

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Gtalk

• Released in August 2005
• Designed to work with third-party clients
• February 2006 it was also built into gmail

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Gtalk (Cont.)

• Features
• Open protocol
• Voice chat
• Good User Interface
• Works with gmail

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Financial Data - Google

• 2005 Revenue (USD) 6.14B

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Regional Effect

• Most people will use what everyone around them
  uses
• This tends to make one IM network dominant in a
  region
• Some IM servers are country specific
• QQ China
• Gadu-Gadu - Poland

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Popularity Map
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Strategies

• Evolutionary
• Compatibility with other networks
• Google Talk users will be able to communicate
  with AIM
• Yahoo Messenger and MSN

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Strategies

• Revolutionary
• More features
• Video chat, Voice chat

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Conclusion

• Market is saturated
• Users are locked-in to the network that everybody
  else uses
• Convincing users to switch is hard