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That little window on your PC--or cell phone--bearing an instant message from a colleague in the next room or the next state is becoming more important in business, and America Online and Microsoft are fighting for that space.

The leaders in instant messaging are heading for a showdown as the service grows among business users and goes mobile, says Gartner Group in a new research study.

"It's a battle of the titans," says Neil MacDonald, analyst. "We think [instant messaging] is a very underutilized tool for real-time communication."

What's more, it may be "the killer application for wireless," MacDonald adds. Phones may use either SMS (short message service) or let you tap into AOL instant messaging on your mobile phone.

Services such as stock transactions via instant messaging are currently in an "embryonic phase," but are promising, he says. "We are on the verge of a flood of new applications using instant messaging."

Hint of Antitrust Charge

AOL and Microsoft now divide the lion's share of instant messaging customers, MacDonald says. Fifty-two percent of consumers and 40 percent of business users rely on AOL's instant messaging service, while 36 percent of consumers and 40 percent of business users turn to MSN Messenger, Microsoft's version.

But the tables could turn with Microsoft's HailStorm Net services, announced in March, MacDonald says. Microsoft will bundle its Passport single-sign-on service, including instant messaging, with the forthcoming Windows XP operating system.

"That will create a community of Passport users which will over time be larger than the number of AOL users. It's another potential browser war," he says, referring to the extended court battle over Microsoft's bundling of its Internet browser with Windows software.

The consultants predict the battle between the rival instant messaging technologies will come to a climax by 2003. The result? Either a marketing and technology deal between AOL and Microsoft, or one of the two will be effectively eliminated from the instant messaging market.

Trust the Messenger?

"This isn't about technology," MacDonald says. "Microsoft instant messaging is pretty good, AOL is good enough. It's about the community of users that are available to you. What Microsoft wants to do is get control of that community."

Microsoft "holds the upper hand in terms of Web services technology," but the giant software company "has issues with public perception in terms of trust and reliability," he adds. Users may be reluctant to trust Microsoft with sensitive information transmitted via instant messaging.

The Gartner study also analyzes other competitors offering instant messaging products, including Yahoo, Jabber.com, Lotus, and Novell. But because AOL and Microsoft control between 85 and 90 percent of the market between them, the others are relatively insignificant, MacDonald says.

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