Huge week for mobile IM. Israel based Followap, provider of Vodafone, was sold to Neustar for $140M. Montreal based OZ, Followap’s rival and provider of Cingular and T-Mobile, has racked an impressive $34M en route to massive expansion. Comverse is also a player of course, being the provider of Verizon Wireless’ mobile IM, but Comverse has other issues to deal with right now.

On the other side of the equation, Yahoo and Nokia have announced a partnership for the purpose of embedding Yahoo IM & Email into Nokia’s mass market series 40 platform. This will make Yahoo! email and mobile IM available for pretty much every GSM operator in the world. Big news. Too bad Yahoo is a distant 3rd when it comes to IM, but none the less it’s a significant move.

Quite hectic? yes. Chaotic mess? not exactly. What we do have is another stage of a titanic positioning war going on about business that has not yet matured.

Operators have their own vision of mobile IM, one that is very different then the one large internet players have in mind and that’s the sorcerer’s stone. Mobile operators, like Vodafone, would like to see their mobile subscribers receive all their communication services from the operators. For that to happen, some fundamental assets must come alive within the operator’s network. The subscriber’s mobile address book is such a key asset. SMS is already the mobile IM killer app, but the address book is still static, meaning that presence information is not incorporated. If Vodafone could add that, then your mobile address book would become a defacto IM launchpad. Moreover, operators are better positioned to provide mapping and other location based services that can eventually generate high premiums on top of the presence infrastructure. If operators had their way, there would be no need to use MSN Messenger on a mobile phone. Ever.

On the other side the IM players like MSN and AOL have a huge advantage and that is the people’s support. Users already associate themselves with the IM networks and they are not going to switch identities anytime soon. If you asked users for what THEY want, they would tell you that they want the exact same Internet experience on their mobile phone. I have an MSN account already and I use a mobile phone from Orange - does anyone really see me voluntarily becoming aner@orange instead of aner@msn? This is why operators end up going down the presence route. It is a much better strategy then head banging.

So who’s winning the mobile IM battle? Is there real business behind all the smoke?

So far the market has been split geographically. Internet centric North America has been heavily leaning towards the Internet IM players which have easily won the first round. You can find MSN, AOL and Yahoo clients on every US operator today, most of them enabled by OZ. Mobile centric Europe is more complicated, thorough and slow. Vodafone tried to launch it’s own mobile IM community, failed miserably, and sent the rest of the European operators to a 5 year halt. However, the recent maturity of IMS as well as progress with interoperability (a strategic GSMA effort which Followap, being the global provider for vodafone, wisely jumped on top of) has put operators back in the race again. If operators can really pull presence off the shelf, make it work and most importantly make it interoperable, they may have a shot at keeping MSN and Yahoo out of their space.

The sad truth is that both sides could have had this battle long won by now if not for strategic mistakes. The Internet IM players original sin was lack of interoperability. Operators cannot go through deployment cycles of 3 different IM products and that’s what AOL, MSN and Yahoo stupidly tried to put them through. Their second mistake was their reluctance to partner with mobile enablers. MSN, AOL and Yahoo thought they had mobile all figured out. Of course they didn’t. By the time they realized they don’t have a clue 3 years and half of the enablers where gone.  Operators on the other hand simply could not make a decision on going for an application. They issued RFP after RFP, stumbling upon business models, billing models, client vs. no client, presence vs. non-presence all and all ending up without a single successful deployment.

So is there business involved? I personally see both applications - live address book and mobile IM - will co-exist side by side, with a clear edge towards the existing Internet IM networks. I don’t really see mobile IM becoming a killer app. SMS does the job very well and presence has too much of a load with privacy and reliability issues. There are two main reason I see an edge for MSN, AOL and Yahoo. One is the fact existing IM addicts are already on their networks. The other, more important one, is the fact they provide a comprehensive list of services including email, search, commerce and entertainment. This creates new business and is not an improvement of an existing business. That’s also why the Nokia deal is valuable - it pushes Internet as an off the shelf product to mobile devices and makes operators decision cycles shorter and more focused, and that by itself is very good news.  

As for the long term vision for Presence… I don’t know. it’s like world peace. Makes a lot of sense but for some reason is very hard to get accompished.