Microsoft Plans More IM Options

Microsoft plans to deliver a new version of its popular MSN Messenger client by mid-2005 that will let users create a more customized instant messaging experience, the company says.

Aside from the user experience, MSN Messenger also has to bring in more money, Microsoft representatives say. The company has not really tapped the online advertising opportunities in the client, said Yusuf Mehdi, corporate vice president of Microsoft's MSN Information Services & Merchant Platform division. He addressed the topic at a meeting last week with financial analysts at Microsoft headquarters in Redmond, Washington.

To that goal, some of those new services might involve fees, subscriptions, and other user costs, Mehdi said. For example, the company charges a monthly fee for access to a game IM users can play with their MSN contacts. Microsoft introduced gaming recently in the U.S. and will roll it out internationally in the coming months, according to a Microsoft spokesperson.

Already Charging

In South Korea, Australia and the U.K., Microsoft offers avatars, which are digital renderings of people that users can purchase and dress up to develop an online persona. Users pay a small fee to personalize their avatars with, for example, sunglasses, a boom box, a designer outfit, or a hip hairstyle. Since Microsoft began offering this service, millions of avatar transactions have occurred in South Korea alone, the spokesperson says.

Advertising is another potential source of revenue; Microsoft expects the online ad market to grow rapidly from $7.6 billion worldwide in 2003 to $19.8 billion in its 2008 fiscal year. The MSN unit recently reported an operating profit of $121 million in the 2004 fiscal year, the first full-year profit ever for MSN. The company attributes the turnaround to increased advertising revenue overall and a growth in paid search listings.

MSN Messenger is one of the most popular IM applications, with 135 million unique users worldwide, according to Microsoft. MSN Messenger users are very active, sending about 2.5 billion messages per day, says Brooke Richardson, lead product manager for MSN Messenger at Microsoft.

"If you look at the global traffic of SMS, on Messenger our traffic is roughly double that," she says.

Upcoming Features

The next release of MSN Messenger will let users further personalize their messaging experience, Richardson says.

"Customers like to personalize their experience because they see Messenger as an extension of themselves in the online world," she says.

Microsoft will probably offer avatars in more countries, as well as other personalization options such as the capability to create skins for the Messenger client, Richardson says. Skins are already popular for Microsoft's Windows Media Player.

Avatars and skins are features MSN Messenger users request, says Pieter Dom, who runs the MSN Messenger enthusiast Web site Mess with MSN Messenger. But users also have more practical requests, such as contact lists that can accommodate more than 150 people, file downloads that can be paused, offline messaging, and automatic MSN Messenger updates, he says.

Richardson said Microsoft is aware of all these requests and is considering them, except for including MSN Messenger in Windows Update part. Messenger users will have to continue downloading updates for the IM client separately from updates for Windows, she says.

"Our customers are not only Windows customers and they are also not only Windows XP customers. That is why we have our own update mechanism in place--we need it," she says.