hn-classics/_stories/1998/7279965.md

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

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