Did AOL Win The ‘IM’ Battle But Lose The War?

Earlier this week, Microsoft Corp. all but conceded defeat in its much-publicized instant messaging battle with America Online by announcing that it will no longer attempt to make its IM software communicate with AOL’s.

Since July, the Redmond, Washington-based software giant has been trying to penetrate the lucrative instant messaging market by linking its MSN Messenger Service to AOL’s more than 17 million users.

However, AOL — perhaps taking a lesson from what happened to Netscape during its browser war with Microsoft — systematically and successfully blocked Microsoft’s users from contacting its members. This action sparked an escalating cat-and-mouse game between the companies, with each company’s engineers trying to bypass the other’s latest maneuvers.

Snipes Keep Flying

Even though Microsoft announced that it is bowing out of the instant messaging battle for the moment, it couldn’t resist taking one last snipe at AOL.

A Microsoft program manager told the press that the AOL Instant Messenger program contains a bug, known as a “buffer overrun,” that makes it possible to run software code on users’ PCs without their knowledge. Microsoft further claimed that AOL had used the bug to help identify MSN users.

The programmer then added that Microsoft ultimately concluded that the only way to allow its users to communicate with AOL’s would be to open them to the same risk – and refused to do so.

Meanwhile, AOL vigorously denied that anything in its software is dangerous to its users and called Microsoft’s claim a “fake issue.”

Will Microsoft Seek Revenge?

While it appears that AOL has won a solid victory against Microsoft in the battle to be the dominant player in the consumer instant messenger battle, the company may live to regret its refusal to compromise.

According to a new report by Forrester Research, Inc., AOL has been slow to cash in on instant messaging as a corporate collaboration tool in the business market, while Microsoft has taken the lead.

“As companies adopt IM for business collaboration, AOL and Yahoo! must surmount their consumer-concentric myopia,” the report said.

According to Forrester, both Lotus and Microsoft have been quickly integrating their IM solutions into their enterprise offerings, putting them in a position to exploit the growing opportunities in the B2B marketplace.

Microsoft’s Turn

To compete, the report suggests that AOL must be willing to upgrade its IM offerings from simple communication services to robust application environments.

Still, when it finally gets up to speed, would anybody be surprised if Microsoft’s dominance in the B2B IM arena is used to block any AOL foray into this burgeoning market, thus completing the circle of revenge?

I think this kind of nonsense is bad for the industry as a whole. It is truly pathetic when those at the helms of huge companies such as AOL and Microsoft act like spoiled children instead of the reasonable adults they claim to be.

What is even more disturbing about this perpetual tit for tat scenario is the same as it has ever been: Innocent consumers and businesses get caught in the crossfire.

What do you think? Let’s talk about it.