Microsoft, Yahoo Reportedly Ready To Link Instant-Messaging Services

Microsoft Corp. and Yahoo Inc. are expected to announce Wednesday interoperability between each other's instant messaging service, a move that could dramatically change a market that's been dominated by America Online Inc., a newspaper reported.

Microsoft and Yahoo are expected to allow subscribers to chat across each other's services and to make computer-to-computer voice calls, the Wall Street Journal reported Tuesday.

AOL, a unit of Time Warner Inc., is the clear leader in instant messaging with 41.6 million subscribers. In comparison, Yahoo, which has the second largest network, has less than half the subscribers of AOL at 19.1 million, according to web metrics firm ComScore Networks. MSN has 14.1 million subscribers.

Instant-messaging subscribers have long complained about the inability to chat across networks, unless someone is willing to join multiple services. From the vendors' perspective, keeping customers on a closed network creates a captured audience for online advertising and makes it easier to lure subscribers into using other services.

While a Yahoo-Microsoft alliance would put pressure on AOL, that situation could become short lived. Microsoft has been talking with AOL about combining the two company's Internet operations, the Wall Street Journal said. Microsoft owns the MSN Web portal.