• by David L. Smith , January 28, 2002

Why is IM (Instant Messaging) not yet a major advertising venue in the U.S.? Currently, the barriers to “critical mass” penetration in the U.S. are fourfold and if any one of these barriers goes away, it will be a big catalyst for market growth, if two or more are defeated, the market should really take off from a commercial perspective. These barriers are standards, security, penetration and age of average user.

Instant Messaging can be a great boon to users. And, like email and the Web, if it becomes ubiquitous, it will represent a great advertising venue, based on size alone.

What’s the big deal with IM? Well, if you are asking, you are not a user. It does not take long for a user to get hooked. Whether you are a teen, using it via a wireless device or with your pals at night from your desktop, or if you are an adult, using it to communicate with friends from your desktop at home and increasingly from work, the functionality of this amazing medium is addicting. While to the unwashed it seems like yet another version of email, it is so much more from a functionality and simplicity standpoint.

I’d like to discuss the four issues outlined above in the hopes of pushing ahead the dialogue to move this medium ahead. Given that the major vendors can impact the first two barriers, they are artificial and could go away at any time with some work and cooperation.

First, standards (here we go again). Contrary to popular belief, AOL did not invent Instant Messaging. It was first made a commercial success by an Israeli company that developed ICQ. ICQ was purchased by AOL several years ago and is a separate brand within AOL vs. AIM and AOL Proprietary Messenger. But, it does not communicate with AIM and vice versa. The other leaders Yahoo and MSN do not communicate with each other or with the AOL products. When AOL was merging with Time-Warner, there was talk of AOL agreeing to do something about establishing open industry standards to show that they are not monopolistic. But all that seems to have faded. MSN and Yahoo have gone on record that they need AOL cooperation to establish a standard as it is the big factor in the marketplace and they can’t do anything without AOL’s cooperation.

Something does not compute here. When did either Yahoo or Microsoft care about what others thought in developing standards? And, now that MSN and Yahoo have shown growth to the point where their combined market penetration is 75% or so of AOL’s combined IM user base, what if they did work together on a standard? Their resulting momentum might leave AOL in the dust. Maybe they don’t want to work together and all think that they can own this market 100%. This is like a throwback to the late 80’s and early 90’s when I had accounts with AOL, CompuServe, and MCI Mail and never the twain would meet. Only when everyone started using open industry standards where they all talked with each other did email take off as a universal communications medium. The Tower of Babel must come down and users need to stand up and demand compatibility between the different IM clients.

The second has to do with security on the desktop. Security issues are probably behind the slow growth in the office (according to JMM, there are only 13MM office users in the U.S. while there are 54MM home desktop users). One of the dirty little secrets of IM is that it creates a big hole for access to your desktop and your network from the outside world. This is why office usage is a function of individuals putting it on their desktop, much to the chagrin of IS personnel. Some fixes are rumored to be available some time this year, but I am not going to hold my breath. Until these fixes are available across all of the major IM clients, IM will be a rogue app at work and fought tooth and nail by the IS folks. Fixing this issue could be major and if AOL won’t do it, some anti-virus company could make a killing with the fix. All I know is that once our whole company was wired with an IM client, the “commotion factor” went way down. People ICQ’d or AIMed others before showing up at their desks and interrupting workflow. Or, sent an ICQ before calling. (Mediasmith currently uses a local server based version of ICQ that is closed to those outside of the Mediasmith network to overcome this problem. As a result, we are not optimizing our potential in communication with clients or vendors).

The third has to do with market penetration and usage. From a mobile standpoint, the U.S. only had 5% of the world mobile wireless Internet market in 2000 but is expected to grow 45 times or four times faster than the rest of the world by 2005 according to Intermarket. This should put mobile wireless in the hands of more than just teens. Fixing standards and security should result in even faster adoption on the office desktop. Given that there are only a few vendors, if this medium becomes ubiquitous, the reach potential will bury any other Interactive medium and will be akin to the reach that the big three TV networks used to have from a mass communications standpoint.

The fourth, time will fix if nothing else does. Because even if the penetration does not grow in the workplace and security and standards are not in place, today’s teens will get older. While 81% of teens 12-17 use email (91% for 18-19 year olds as they begin college), an astounding 70% use some form of IM (83% of 18-19 year olds) according to a recent AOL study. (Mobile wireless devices have not taken off among teens in the U.S. to the degree that they have overseas, partly due to culture and partly due to policies of many schools that associate pagers with drug dealing and ban them.) With most product categories, usage continues as the target gets older, so massive desktop IM penetration will happen in time as it is a mainstream communications vehicle for the next generation.

Asia and Europe are very different of course, with much larger penetration against all demographic segments due to wireless. According to the Intermarket study, the big growth, besides North America and Europe, will be in Latin American, with almost no mobile wireless penetration to date and lots of potential.

What will we advertise and how will we do it? The creative unit currently allocated for advertising is too small you say. That hasn’t seemed to stop Web advertising. If the market is there, a solution will be found, whether it is “outside the IM,” within messages, opt-in or other methods. For example, in many cases, the people on one’s “buddy list” are peers and similar demographically. A whole new model could evolve through targeted advertising chosen by the sender. What if the sender were offered free IM (yes, it will cost in the future, once they have you hooked) if they agreed to send a small snippet of an ad with their message? In this scenario, the user would get to pick the advertiser that they thought their friends might be most likely interested in. This could result in advertisers actually thinking about what might most appeal to their target and jockeying for position to be the hip ad that is being sent this week.

But one thing is for certain; the model will work when the critical mass develops. Why? Because the market will be too big and too efficient to ignore.

- David L. Smith is President of Mediasmith, Inc., the Integrated Solutions Media Agency based in San Francisco and New York.