Unlikely alliances form amid Net Wars: What Google, Skype, Apple make us do…

Bambi Francisco – MarketWatch

Copyright MarketWatch
SAN FRANCISCO (MarketWatch) — There is an upside and downside to the alliances forming in the war of the virtual worlds.
The downside is the partnering could mean the pie is shrinking and we’re near a top of the market. The upside is that all the unlikely formations are as riveting to watch as some of the best movies out there.
So, you may want to sell some stock, and buy popcorn! Buy popcorn off Froogle.
If you haven’t heard, Microsoft’s (MSFT:
news, chart, profile) MSN and Yahoo (YHOO:
news, chart, profile) , decided, apparently after being in discussions for a “long time,” that they should look beyond their differences, accept each other’s imperfections, and commit to one another, well, when it comes to instant messaging, anyway.
Upon hearing of the IM combo (as I stared at the five instant messaging clients that clutter my desktop), I pinged MarketWatch’s software reporter and asked: “OK. What’s going on up in Redmond?”
Coincidentally, I used AIM, which holds the bulk of my contacts, and is the dominant IM client across the desktops in the U.S.
Back to the point: If Microsoft were a person, I’d say it’s broken out of its hardcore, perhaps arrogant and prideful shell and risen to another level of consciousness that’s allowed it to embrace its rivals and become one with them.
Getting soft
In some ways Redmond, Washington-based Microsoft, dare I say, appears to be getting a bit soft.
Whatever drove it to achieve this new self — a tinge of paranoia perhaps — isn’t the point. Soft is good. It’s good to embrace enemies, forgive, forget, and then forge ahead.
Last month, speculation was rife that MSN wanted to buy Time Warner’s (TWX:
news, chart, profile) AOL unit, a relationship that almost certainly would have ended AOL’s longstanding partnership with Google (GOOG:
news, chart, profile) and made MSN a far more formidable competitor in the search wars.
Earlier in the week, in a bid to compete in the online music wars against Apple (AAPL:
news, chart, profile) , the Washington-based software giant settled its differences with RealNetworks (RNWK:
news, chart, profile) for $761 million, of which $460 million is up-front cash.
Also last month, longtime rivals Microsoft and Palm (PALM:
news, chart, profile) announced that they would birth a smart phone as Web interaction goes wireless.
To be sure, Microsoft isn’t alone in forming interesting partnerships.
Google and Comcast may end up with AOL’s content, according to a WSJ report Wednesday. Then there’s Google’s recent alliance with Sun Microsystems (SUNW:
news, chart, profile) , as well as eBay’s acquisition of Skype Technologies.
Still, the question I have is: Why is Microsoft aligning itself with everyone?
The obvious three reasons are: Google, Skype and Apple.
Google’s Google Talk, as nascent as it is, is likely to become popular quickly. It’s only been around a couple months and we’ve seen enough upstarts disrupt the playing field or become the real game changers.
Skype, which was scooped up by eBay (EBAY:
news, chart, profile) for a total of $4 billion, reached 54 million users worldwide in two years, surpassing AOL’s IM, which took a decade to top 45 million users. Skype just released its first Skype-Linux phone. Yep. And it won’t stop there. There will be new Skype phones that everyone will be carrying around. Well, maybe. Let’s see, should I get a Skype phone with really cheap phone service?
Interoperate this
I can go on and on. But here’s my take on the IM wars. I think consolidating two players – Yahoo and MSN – is better than having them operate separately. Combining six — Google Talk, Skype, MSN Messenger, Yahoo Messenger, AOL Instant Messenger, and ICQ – would be even better.
In theory, this Yahoo, MSN united IM will be available in the second quarter of 2006. It’ll work only if they execute. It’s all in the execution because we all know they have the resources — the name brands, the intellectual capital, the distribution.
I also believe that interoperability is inevitable. After all, emails were once islands, as I was reminded by a couple of product employees at EarthLink.
To be sure, the instant messaging world may be different. “Seems like AOL and ICQ took forever to be compatible, and I’m not sure they are now,” said Mike Cassidy, CEO and founder of Xfire, an IM client for gamers.
Now, the other questions I have are: Who will AOL align with?
And, if AOL aligns with Google, will the alliances be Yahoo and MSN vs. Google/AOL vs. eBay/Skype?
Like I said, grab the popcorn.
Sound off: Which partnership makes better sense — AOL with Google or AOL with MSN/Yahoo? And, who will IM wars, AOL Yahoo/MSN, Google or Skype? E-mail: Bambi.Francisco@dowjones.com.
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Bambi Francisco is Internet editor for MarketWatch in San Francisco.


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