Well, it has finally happened. After much talk about interoperability, (which many thought would amount to nothing but that), Microsoft and Yahoo! have finally made their instant messenging clients compatible, allowing some 350 million accounts to communicate with one another and finally ending the “Cold War” of instant messenging.

I was wrong

I’ll be the first to admit that I recently said that I thought this wouldn’t happen – I was quite wrong, and I guess I’m still surprised at it. Though it had been announced many months prior, I remained skeptical until today.

In retrospect, it looks like a good move on Microsoft and Yahoo’s part. After years of trying to overtake AOL’s AIM by themselves, I think they’ve realized that it can only be done through a combined effort. Obviously, some ad-revenue sharing terms have been agreed upon, as I pointed out before – there’s just no way they would have joined hands this peacefully.

This move also had more to do than just with wanting to overtake AIM. In recent years, Skype has taken off fast – Skype is pretty much the program to use for VoIP, and their offer of free calls to the US/Canada at least until the end of this year (along with other promotions) is only going to increase their market share. While Skype and Microsoft or Yahoo’s clients are certainly not mutually exclusive, I’m willing to bet execs at both of the companies involved in today’s deal were at least somewhat worried about Skype eating into their user base. (Both Microsoft and Yahoo’s clients offer some form of VoIP.)

So how does this translate?

For the end user, it doesn’t mean too much, other than not having to download another client to communicate with your buddies on the other network, of course. But, many people will be quick to point out that their have already been other clients offering this inter-network compatibility for some time. (GAIM, Trillian, Jabber clients etc.) These people will say that because of this, today’s announcement means little.

Perhaps to them, but to the vast majority of the online world, (who don’t use GAIM, Trillian, et al.) this does mean quite a bit, provided Microsoft and Yahoo do their best to promote this new functionality. As I mentioned before, the end user won’t have to care too much about the changes, but the implicit effects it’ll have could be huge. Instant messenging is one area that is particularly susceptible to the network effect, and this new, larger user base will certainly help Microsoft and Yahoo in the end.

While you may not have any contacts on MSN or Yahoo (or both), that doesn’t mean this merger isn’t important. (I personally only use MSN and then only when I’m free to – I turn it off during studying or when I’m trying to concentrate because I think they cause me to waste time, and promote constant short-term attention, but that’s another story.) The combined user base of this new IM network is going to be a huge source of ad revenue, one that hopes to grow even more due to the snowball effect.

I also wonder how the makers of AIM will respond to this. Years ago, they purchased ICQ and quietly made it the two compatible, but did little to promote this. Once the worldwide leader in active users, ICQ has since fallen, now having fewer active users than either AIM, MSN or Yahoo.