Chat talk

That is just one person's opinion. One of my current WIPs is full of that sort of thing, and text messages, and a facebook equivalent (it's set in 2055 so it's not the facebook brand but it's a similar type of social media platform), so if it's Bad Writing then, ooops!

For published books that include chat room/internet text conversations, there's the Mr Mercedes series by Stephen King. At least the first book in the series (can't remember if the second and third books also have chat room conversations in them). I've read other books as well with internet/text type conversations in them, though I can't think of other examples off the top of my head. Okay, one more. Ready Player One by Ernest Cline. Formatted just the same way as you've done it, too. (I don't have a copy of Mr Mercedes to check how King formatted it, but from what I recall, it was done in a similar way.)

I've never written my characters in a chat room but I have read it (can't remember what book. Sorry.) What you've done sounds right. Keep doing you and listen to your writer-ly instincts.

A further thought - if it's not easy to read, it might be to do with the way the conversation flows (or perhaps doesn't). Same as with spoken dialogue. It might be worth looking at it from that perspective

People giving critique are good at spotting that something's not working but don't always identify why it's not working. In this case it could just be that your beta reader's not a fan of social media conversations. Or it could be that the conversation's not flowing right so you need to pay attention to that. Personally, I approach text messages and chat room/internet dialogue the same way as spoken dialogue. Things like not including irrelevant small talk and conversations going off on a tangent, even if that's technically speaking more like how people communicate in real life. Paying attention to how the conversation flows and sticking to what's relevant for plot, characterisation, worldbuilding etc.

When I've seen 'chat room' talk done in novels, it's always been in the format you've shown, and it always worked fine for me.

Yep, I've done it. No issue at all - in fact it gives the novel a further whiff of authenticity.

Makes it feel more real.

That looks great. I wrote an entire chapter in that exact manner, and I've read several works featuring text conversations in that style.

Also, remember, just as we all have unique voices when speaking, we also have unique voices when typing. Everyone has favorite abbreviations, emojis, terms, etc. For example, I have one friend who never uses an apostrophe, and I have another friend who overuses ellipses.