AOL/Google: VOIP Buddies

The AOL/Google deal includes a peering arrangement that will connect large pools of VOIP-enabled IM users

December 22, 2005

3 Min Read
AOL/Google: VOIP Buddies

While the newly announced alliance between Google (Nasdaq: GOOG) and Time Warner Inc. (NYSE: TWX) division AOL may be mostly about advertising in the near term, it also represents a large VOIP peering arrangement between two potentially game-changing voice providers. (See Google Takes AOL Stake.)

Under the terms of the deal, Google Talk IM users will be able to talk to users of AOL’s popular AIM client over a pure VOIP connection. (See Jabber Jingles All the Way.) This could significantly widen the community of people who routinely place PC-to-PC VOIP calls.

"Google’s ability to tap into the AOL user base is pretty powerful,” says former Dialpad Communications Inc. CEO Craig Walker. Walker's company was purchased by Yahoo in June. (See Microsoft Buys Skype Rival.)

"AOL has the largest IM client with AIM, and Google has the most eyeballs [at its site] on a daily basis,” adds VOIP pundit and blogger Andy Abramson.

If millions of IM users are placing VOIP calls to each other totally independent of the public switched telephone network (PSTN), it could put a significant dent in the PSTN interconnection businesses of the RBOCs and smaller players like Level 3 Communications Inc. (NYSE: LVLT). (Level 3 chose not to go on record for this story.)

"And that makes a ton of sense," Walker told Light Reading Wednesday. "Why incur the cost of touching the PSTN if you have two big partners willing to open up their APIs and let them just go directly over the Internet?” (See VOIP Peer Pressure.)

Abramson also points out that Google and AOL may provide free VOIP 411 calls, while the phone companies charge 35 cents for such calls.

Google/AOL marks the second major agreement to connect the VOIP-enabled IM clients of two major Internet brands and their users. Yahoo Inc. (Nasdaq: YHOO) and Microsoft Corp. (Nasdaq: MSFT) announced October 12 that their VOIP-enabled IM clients would interoperate. (See MSN, Yahoo Link IM Services.)

“Two camps seem to be emerging,” Walker says. (See VOIP Peer Pressure.)

Some disagreement exists in VOIP circles whether or not those two camps, Google/AOL and Yahoo/Microsoft, will eventually make their IM clients speak to each other. If that happened, users of the three most widely used IM clients -- AIM, Yahoo, and MSN -- could appear on each other's buddy lists and place free VOIP calls to each other.

History provides some examples of technical openness translating directly into revenue growth. When mobile phone carriers began allowing the exchange of text messaging between their subscribers and those of their competitors, usage of text messaging skyrocketed.

Abramson recalls that AOL underperformed as an Internet access provider because up until the mid 90s it allowed its users to exchange email only with other AOL members. AOL CEO Jonathan Miller remembers that, too, and isn’t likely to make the same mistake with IM and VOIP.

The wild card in all of this may be willingness of AIM users to begin calling people on their buddy lists. According to a recent AOL survey, 20 percent of AIM users say they “currently enjoy, or would like to try,” making live voice calls directly from their IM service. Another 12 percent say they would be interested in an IM-based VOIP service that could replace their primary household phone line.

Google and AOL both confined their comments to those in the press release announcing the deal Wednesday.

— Mark Sullivan, Reporter, Light Reading

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