That's the same thing I was thinking of why it's loosing people, if any. It's too complicated, but I disagree that it's because it does more. It actually does less and makes it harder to do.
No pretty pictures, no video, no audio, no mobile devices, almost no one can send files because they're behind a router or firewall, if you want to talk to your friends you have to make sure you meet on the same server and channel--you can't just message them directly, nick changes make the notify list useless and block private messages from going through, half the users don't even see your away messages, it doesn't notify you when someone sends you a message unless you're actually looking. Yes, I know you can configure it to do all these things, but if you look at it from the perspective of a new user, no one in their right mind would choose to go through all that hassle to chat with their friends if they had the option.
That being said, it's still my favourite and I want to get more of my friends to use it. I'm always helping them over the learning curve to unlock it's advantages.
I can see a lot of potential if people would be more forward thinking and agree on ways to further develop the technology and address it's shortcommings. I see them being remarkably easy to deal with.
