FutureTool: ActiveBuddy

Millions use instant messaging to chat with friends; now the technology has a commercial application and is on the verge of becoming a new online ad format. ActiveBuddy, a year-old Silicon Alley startup, funded by Reuters and others, has developed interactive agents, or bots, that deliver content via instant messengers. Companies that sponsor them can become “buddies” and chat with potential customers, providing them with product information and linking them to websites where they can sell them products.

Users enter company names on their buddy lists, call them up with the click of a mouse, and converse with them. The buddies are programmed through a scripting technology to answer a wide range of questions. “You can have a conversation with a brand,” says Peter Levitan, ActiveBuddy’s CEO. “No one else can do that.” “How can I get a wine stain out of a silk dress?” is a question a Tide buddy would be able to answer, he says.

Unfortunately, Tide isn’t a client yet. However, ActiveBuddy has received acclaim for its first program for Capitol Records, which has created a buddy called Googly Minotaur to promote Amnesiac, the new album from Radiohead. Launched June 5 on the AOL instant messaging system, the buddy was promoted through 1,200 fan sites and email sent by Capitol to its customer lists. Viral marketing is playing a role, too, with heavy pass-along reported. The buddy provides exclusive information about the band, related contests, and games, all of which can be accessed by clicking on links from the buddy. There are links to online retailers, which gives Capitol the opportunity to sell Amnesiac and other recordings.

Robin Bechtel, Capitol’s director of new media, says, “We wanted to do something new and compelling as we go beyond the Internet to instant messaging.”

Capitol is an ideal ActiveBuddy client because it reaches a teen audience, which constitutes 61 percent of IM usage, according to Jupiter Media Metrix. Teens engage in multiple chats at one time from their long buddy lists, so they are a promising ActiveBuddy target. But IM use is growing among the general public with half of all computer owners—97 million North Americans, using it. Indeed, IMing is being spoken of as an alternative to email.

The other active ActiveBuddy user is Reuters, which is using it to disseminate headlines and stock news. When asked how the company would use it as an advertising vehicle and to generate revenue, David Silverman, managing director of personal finance, said it wouldn’t generate revenue directly but would expose users to advertising on the Reuters site when they link to it.

AOL is the only IM service that provides access to ActiveBuddy. The company is negotiating with other IM providers to use their systems. The companies share in ActiveBuddy’s revenue from serving it.

Rates for ActiveBuddy are twofold, based on producing the interactive agent and hosting the IM chats. “We charge on a usage basis,” Levitan says, similar to a CPM rate, with customers paying per chat, with an initial production fee.

At this point, ActiveBuddy is relatively new and unproven, yet it already has its adherents. Says Lydia Loizides, a Jupiter Media Metrix analyst, “Over the next 12 to 18 months, you’re going to see the metamorphosis of IM into something more than just a consumer tool for people to talk with.”

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