Microsoft to Team Up With Yahoo

Microsoft Corp. and Yahoo Inc. are preparing to link together their free instant messaging services as they take on entrenched messaging leader America Online and market newcomer Google Inc., a source close to the companies said Tuesday.

The deal, the first major alliance between two of the Web’s main providers of instant messaging, will allow users of Microsoft’s MSN Messenger service and Yahoo Messenger to swap instantaneous text messages with each other.

Neither Microsoft nor Yahoo would comment on the alliance, first reported by the Wall Street Journal.

The tie-up, expected to be announced today, also will give users of both services the ability to communicate via voice as well, a feature that up to now has been restricted to users within each service, the source said.

AOL, a unit of Time Warner Inc., is currently the market leader in the instant messaging space with a share of 56%, according to research firm Radicati Group. But with Microsoft and Yahoo making up the rest of the market, their combined service could be a formidable threat to AOL. Google launched its own instant messenger, which includes Internet voice calling, in August.

At stake is the ability to attract users and offer them other services and information from the Web portals, which in turn helps Microsoft’s MSN Internet unit, Yahoo and AOL earn advertising dollars.

The technology behind the deal already exists. Microsoft has opened up its corporate online messaging service, which requires a license and offers more features, to AOL and Yahoo. Unlike free messaging services, corporate messaging lets businesses install instant messaging within corporate networks, where conversations can be monitored and saved, much like enterprise e-mail.

Being able to send instant messages to different services using a single program isn’t new, however. Users of unified messaging services such as Trillian can use a single software program to send and receive instant messages from AOL, MSN, Yahoo and other providers, as long as they have an account with each service.