Vodafone and MSN IM: a taste of things to come

Vodafone has teamed up with Microsoft to allow the 165 million users of the MSN Messenger instant-messaging (IM) service to exchange messages with people using Vodafone's Messenger service. Both MSN and Vodafone plan to market IM by letting customers buy bundles of messages that can be sent between the Internet and mobile phones. The companies wouldn't say how much they plan to charge, but indicated that big bundles would be cheaper than SMS messages. The service will launch initially in Italy, Spain and the Netherlands

For mobile messaging watchers, this is big news. Mobile operators in Europe have been struggling with IM for a long time. Vodafone Messenger has been available for over two years, but Vodafone has hardly promoted it at all, and we believe that very few people are using it. IM on the mobile has obvious potential to appeal enormously to customers. However, mobile operators have been inhibited by three big issues, which have now been resolved:

• Cannibalisation of SMS revenues? The pricing model for the Vodafone/MSN service is a per-message charge. Anyway, relatively few of the messages sent between phone and Internet are likely to substitute for SMS.
• Lack of interoperability standards? There are now Open Mobile Alliance standards for mobile IM and presence; and on the Internet side, SIP/SIMPLE (upon which the Vodafone/MSN interoperability is based) is increasingly widespread.
• Brand contention with Internet portals? This is the most interesting bit. Until recently, MSN and Yahoo had much more brand recognition than the mobile operators' portals (remember Vizzavi or Genie?). Mobile operators were therefore wary of associating with the Internet portal brands, lest those brands dominate mobile data services too, reducing the role of the mobile operator to a bit pipe. Vodafone Live has changed all that. Launched in late 2002 and backed by an enormous marketing budget, Live now has well over 30 million registered customers and is a widely recognised brand. Vodafone's lack of inhibition about the joint branding of this new service indicates that Live has come of age; and that for Vodafone, at least, the vexed issue of brand contention is finally ready for burial.

With that in mind, the most intriguing remark that Vodafone and MSN made when they pre-briefed us on this announcement was that: "The biggest barrier to a partnership is the first project. We've done that now, and there will be more to follow." A vigorous and expanding partnership between Vodafone and MSN would have a massive impact on the development of mobile multimedia services in Europe.