Yahoo and Microsoft Connect Instant Messaging

Yahoo Inc. and Microsoft Corp. joined forces yesterday on the instant messaging front, allowing users of their systems to communicate with each other and rivaling AOL's messaging system for the top spot.

Users of Yahoo Messenger and MSN's Windows Live Messenger -- the nation's second- and third-largest instant messaging service providers -- will be able to chat with friends on both services while logged on to either program. The partnership is a first among instant-messaging leaders trying to grab a bigger chunk of the substantial market and stay ahead of a number of start-up sites that allow users to chat on multiple services at once.

Interconnectivity between instant messaging services was the No. 1 request from Yahoo and Microsoft's combined 350 million users worldwide, the companies said.

"We're really opening the network up," said Karin Muskopf, product manager for Microsoft's Windows Live Messenger. "You don't have to sign on to multiple clients, which is much easier and more streamlined for customers."

AOL leads the instant messenger market in the United States with more than 43 million users, according to ComScore Media Metrix. Yahoo Messenger comes in second with almost 25 million users, followed by Microsoft with 23 million.

Combined, Yahoo and Microsoft could make inroads in AOL's margin.

In 2003, Skype Technologies SA launched an instant messaging service that went along with its Internet phone offerings. It now has 2.2 million users and ranks fourth behind Microsoft's IM program. Earlier this year, Google Inc. introduced its own service, Google Talk, which has 811,000 users.

Several Internet companies have cropped up in recent years that allow people to chat on multiple instant-messaging services simultaneously. They include Trillian, Meebo, IMVU and eBuddy.

"There's certainly advertising dollars at risk here," said Timothy M. Boyd, a research analyst with Caris & Co. who covers Yahoo and Microsoft. "It looks like this could a preemptive strike against Google Talk, and it could increase competition for ad dollars and traffic."

The joining of the two IM services may not lessen AOL's lead in the market, said David Eller, software and services analyst at Rochdale Securities. He views the venture as a way for the two competing companies to reduce costs while they try to compete in a saturated market.

The Yahoo-Microsoft collaboration allows users to exchange messages, view online profiles and add friends from either service. The companies soon plan to make other features available, such as sharing voice and video and opening up the service to wireless users.

"By joining communities, we're making IM that much more valuable," said Yahoo spokeswoman Terrell Karlsten. "It increases the engagement of both of our services, and that only helps our business."