Cellphone Users Flip for AOL Instant Messaging

USA Today

September 18, 2002

America Online’s instant-messaging service has been the Internet giant’s underachieving prodigy.

It’s the USA’s most popular such product, with some 52 million active users who can exchange missives that immediately appear on the recipient’s PC screen. But AOL has yet to figure out a way to milk significant revenue from the service that’s free to PC users.

Until now.

The company’s nascent rollout of its AOL Instant Messenger (AIM) for wireless phones is quietly paying dividends. The number of unique users — many teens or young adults — swelled to 500,000 in the past month from just 500 in November, AOL says.

At least 7 million messages a day, including less popular and less immediate e-mail, are zipping between mobile phones, says analyst Charles Golvin of Forrester Research. While just 1.7 million U.S. households browse the Web on mobile phones, more than twice as many send text messages.

Mobile phone companies charge for the AIM service, with AOL getting a small cut of monthly fees of $3 to $12 or per-message charges of about 10 cents. Revenue is small but growing.

Even if AOL gets a tiny slice of sales, if it grows to billions of messages a day, “That’s a lot of money,” Golvin says.

AOL also gets multimillion-dollar fees for licensing its messaging software to carriers through its Tegic Communications subsidiary. The software anticipates words, simplifying typing on phone keys by letting users, for instance, punch the “2” button just once, instead of three times, to make a “c.”

“This can be a big business,” says Lisa Hook, head of AOL Anywhere, the company’s largely fizzled plan to pump its content into interactive TVs, handheld gadgets, phones and other gizmos.

Mobile messaging is one of the few viable remnants of that strategy.

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http://www.usatoday.com/money/industries/technology/2002-09-17-aol-message_x.htm