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"Third-party XMPP clients will continue to work with Hangouts for 1-on-1 chats."

For me, this means it basically still exists and my user experience is the same.

Somehow this 1-on-1 chat has stopped working circa 2013 for me. People using google still show up as online in my contact list but do not ever receive my messages. On the other hand I do not appear in their contact list anymore.

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