By Rachel Chalmers
International Data Corp predicts that end-user generated revenues from instant messaging will reach $1.9bn in 2003, and where IDC predicts billions, internet entrepreneurs are sure to follow. A case in point: CMGI Inc, an avid collector of internet properties, has added instant messaging pioneer Tribal Voice Inc to its rather diverse collection. Terms of the deal were not disclosed. CMGI says it will fold Tribal Voice into email software company Activerse, another recent purchase. The resulting company will sell real-time communications and instant messaging software company under the Tribal Voice name. Tribal Voice was founded in 1994 by John McAfee, of anti-virus fame. Licensees of the company’s Powwow server software include AT&T Corp, WorldNet Service and UK ISP FreeServe; the client is said to have 5 million registered subscribers.
America Online Inc, meanwhile, is crowing that its ICQ community has surpassed the 50 million user mark. AOL picked up ICQ when it acquired Israeli company Mirabilis Inc for $287m in June 1998. Besides having quadrupled registrations since the acquisition, AOL says it has signed up $100m worth of e-commerce and marketing deals for ICQ. Apparently, the average user keeps ICQ on the desktop for 3 hours and is active for more than an hour every day. That makes them sitting ducks for advertisers. AOL’s Ted Leonsis said: ICQ is growing like wildfire. Its explosion in just three years to 50 million registered users – and its emergence as the undisputed global leader in the online communications field – are attributable to the power of viral marketing. AOL’s Donn Davis came perhaps closer to the bone when he noted that ICQ has yet to prove itself as a paying proposition. This is truly a worldwide hit product and our next step is to build it into a big business, he said.
At 1.2 million peak simultaneous users, ICQ is second only to AOL’s own Instant Messenger (AIM) in terms of volume. That said, the user base of ICQ doesn’t seem to overlap too much with that of AIM. ICQ users tend to be younger and a staggering 85% of them are based outside the US. Analysts warn that AOL might find ICQers less than receptive to the sort of commercialization that AOL users swallow without a murmur. Not to worry: AIM itself is turning out to be a money-spinner. Lycos Inc has launched a co- branded AIM service. By offering the Lycos/AOL co-branded service, we are giving our users the opportunity to join one of the largest and fastest-growing instant messaging communities online, said VP of marketing Madeline Mooney. It will be interesting to see what the largest shareholder in Lycos makes of the announcement, since that shareholder is none other than the new owner of Tribal Voice: CMGI.
Never mind. If the instant messaging business never turns out to be profitable, AOL can always support itself by selling its own shares. The company has raised $1.25bn in a convertible note sale. The shares have doubled this year and increased by a factor of sixteen in the last two years. Investors in the notes are betting that rise will continue. If the shares go up another 30%, note-holders can convert their notes to shares. Convertible bonds give the dot coms a cheap way to borrow money against their own rising market capitalization. AOL held its first convertible sale in October 1997, when it sold $350m worth of notes with a conversion price 40% over the share price. Investors in the latest issue seem certain that this opportunity will be as profitable as that one.
