---
created_at: '2014-02-21T22:44:53.000Z'
title: America Online to Buy Internet Chat Service for $287 Million (1998)
url: http://www.nytimes.com/1998/06/09/business/america-online-to-buy-internet-chat-service-for-287-million.html
author: ski
points: 222
story_text: ''
comment_text: 
num_comments: 142
story_id: 
story_title: 
story_url: 
parent_id: 
created_at_i: 1393022693
_tags:
- story
- author_ski
- story_7279965
objectID: '7279965'
year: 1998

---
Moreover, he said, ICQ users spend an average of 75 minutes a day on the
service, compared with fewer than 10 minutes a day for highly touted
search and directory services such as Yahoo and Lycos.

Many Internet stock analysts praised the deal as an inexpensive way for
America Online to increase its customer relationships. The company's
shares rose $1.50 yesterday, to $84.75. But there is some skepticism
that chat services, no matter how popular, will turn into big money
makers.

''E-mail, chat and instant messaging are not good advertising
platforms,'' said Bo Peabody, the chief executive of Tripod, an on-line
community service recently bought by Lycos. ''When you chat, you look at
what you are writing, not what other people are writing,'' he said.
Moreover, advertisers worry that their advertisements will be associated
with content that they do not control and may be embarrassing. As a
result, chat services that do take ads receive the lowest rates of any
type of Internet service.

That has not stopped other companies from buying similar services. Most
notably, Microsoft paid a reported $400 million for Hotmail, which
offers free E-mail services. (Unlike ICQ, Hotmail had started to sell
advertisements.)

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Mirabilis also helps America Online's efforts to expand overseas. About
40 percent of ICQ's members are in the United States, 40 percent are in
Europe and the rest are spread elsewhere.

Mirabilis was founded two years ago by four Israelis in their early
20's. With a few million dollars in backing from local investors, it has
built one of the most popular services on the Internet.

Yossi Vardi, the Mirabilis chairman, said the company had been in
discussions with a number of suitors since last August. But they were
initially put off by the price the company wanted. ''People were quite
amazed with our growth and it took them a while to come to grips with
that,'' he said.

America Online agreed to pay $287 million in cash up front and up to
$120 million in additional payments starting in 2001, depending on the
performance of Mirabilis, which will continue to be run as a separate
subsidiary in Tel Aviv.

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America Online's own Internet chat service, AOL Instant Messenger, will
continue to be a separate product mainly to allow Internet users to
communicate with those on America Online's service. America Online will
also provide some technical support to Mirabilis.

Mr. Peabody of Tripod said that since America Online now controlled the
two largest chat services it should embrace an open standard that would
allow the user of any chat service to send an instant message to a user
of a competing service, much as electronic mail works now.

''Now that AOL has a monopoly on the instant messenger space, I'm
hopeful they will open the market to everyone,'' he said. Tripod hopes
to offer its own message service and such a standard would help it break
into the existing market.

Tricia Primrose, a spokeswoman for America Online, said that there were
no standards for instant messages now, but that ''historically AOL
supports open standards that gain critical mass and acceptance by
consumers.''

[Continue reading the main story](#whats-next)
