MSN: shutting chat rooms, opening up IM?

In announcing it would shut free chat rooms, Microsoft highlighted problems with spammers and pornographers. But analysts said there may be benefits for the software giant, which is trying to shunt customers to paid services across its network.

Microsoft said MSN users should switch over to its free MSN Messenger instant messaging service as a replacement for the chat rooms, which are scheduled to close down in 28 countries on 14 October.

Microsoft stands to benefit in several ways from the move, for example, by reducing expenses related to maintaining and policing free web chat rooms, and raising the prominence of MSN Messenger in the regions affected: Europe, Asia, Africa and parts of Latin America. That in turn could help boost revenue when Microsoft begins to charge for IM, something analysts say is just a matter of time.

"Even though MSN Messenger is not a paid service, it's the leading edge of where Microsoft wants to go with paid services," said Rob Helm, an analyst at Directions on Microsoft, an independent market research firm.

Like rival IM services from America Online and Yahoo!, MSN Messenger has attracted millions of users around the world who communicate to other buddies on its network. Although these services are free, they give providers another vehicle for advertising and, more important, keep people using other services in their networks.

But the importance of IM for Microsoft goes beyond that. Later this year, Microsoft is expected to launch Live Communications Server (LCS), which it plans to sell to companies that want IM packaged with security and archiving features. Much in the way email is managed by corporate IT departments, companies will want IM versions that they can control, Microsoft and other tech giants believe.

LCS will initially offer IM, but executives plan on integrating internet phone calling and video conferencing into the software as well. Eventually, Microsoft hopes the product will let companies buy one product to manage all their real-time communications.

"It makes sense in that Microsoft is forcing people into a product path, whereas [on MSN chat] they're simply on a service path," said Michael Osterman, president of Osterman Research, which follows corporate IM trends.

Microsoft expects to allow LCS customers to chat with their MSN Messenger buddies. Thus, the greater MSN Messenger's population, the more useful LCS will be.

Still, pushing online chatters to IM will be an effective step to rid its network of the web's darker side. MSN Messenger allows people to chat with up to 15 other users, offering them a private platform for discussion that is hard for uninvited guests to find.

Furthermore, MSN will maintain chat rooms in the US and Canada, but it said it will only allow subscribers to participate.

Michael Gartenber, an analyst at Jupiter Research, said: "The core reasoning behind this was they wanted to make the environment better for their paying customers. If you're paying Microsoft every month for MSN, you don't want to be harassed by spammers and pornographers."

MSN chat rooms affected by the change will be shut down on 14 October. That's a day before the deadline for third-party IM services such as Trillian to strike a licensing agreement with Microsoft to prevent the possibility of their being blocked. 15 October also marks the deadline for people using older Messenger versions to upgrade to 5.0 or higher.

Jim Hu writes for CNET News.com