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September 13, 2000 Event
Peer-to-Peer Networking: Information Access Revolution or Buzz Phenomenon Du Jour?
Read the phrase "Peer-to-Peer" in any press piece and the word "Napster" is sure to follow. Yet the media’s haste to associate Napster’s popularity with the buzz-phrase du jour has mistakenly imprinted a college student’s whim on what could be the most powerful paradigm in information processing. Peer-to-peer networking represents the next logical evolutionary phase in information processing: mainframes signaled centralized control of information; client server represented decentralized control of information; the Web ushered in centralized information access; now, peer-to-peer marks the dawn of decentralized information access. Yet while Napster’s success inspires visions of a revolution as far reaching as that of the Web itself, it remains to be seen whether viable business models survive beneath the peer-to-peer surface.
Perhaps most impressive about peer-to-peer networking is that the network effect is baked into its core: millions of people leverage a single individual’s impact, and millions of individuals participate in the common information network. Before long, we can expect a full spectrum of peer-to-peer applications to surface - non-media file sharing, shopping bots, auctions, search, messaging, enterprise applications, entertainment - as individuals find niches in which they can exploit peer networks. Peer-to-peer may well herald in the era of the truly distributed marketplace, where not just individuals but pieces of information reside at the fringes of a global information network. In addition, peer-to-peer invites much richer information applications on the desktop than an obese browser, affording users a much more exact online experience.
Yet for all the coolness of this new era of information access, lingering business-related doubts remain. Specifically, are there any viable business models behind all of the peer-to-peer hype? In this nascent space, it is unknown whether commerce, content, advertising, ASP, or unknown revenue streams can be leveraged and ultimately cultivated. Peer-to-peer poster children such as Napster and Gnutella have enjoyed massive user and PR success but cannot lay claim to financial success. Another lingering question asks whether peer-to-peer applications will pose a threat to advertising-based business models as pings replace page views. Naturally, like all good tech media frenzies - push, instant messaging, java, linux, xml - peer-to-peer players ultimately must demonstrate that their cool new models are more bank than buzz.
Napster: The Hot Idea of the Year
Key Learnings
EVERYTHING’S COMING UP P2P
It seems clear that Napster and its peer-to-peer minions have broken the seal on a new wave of information sharing unlikely to go back in its bottle. P2P environments inject new value into the information finding and sharing equation but will not challenge the foundation of the Web. P2P is valuable when creation of content is constant. However centralized server environments such as the Web are more than sufficient when content consumption is far more frequent than content creation.
P2P2B2B2P2B2P... IT’S GONNA BE HUGE
The art of predicting where P2P networks will most dramatically impact the information processing landscape has become part World Wide Web clairvoyance and part business savvy. P2P’s impact may be felt in the tech-savvy consumer periphery, yet B2B P2P networks will thrive and take P2P to its evolutionary extreme. The biggest opportunity in P2P may not even involve "person" to "person" exchange, but rather machine-to-machine exchange. Personal machine self-discovery - or Jini-like technologies that discover patterns such as traffic accidents, flight delays, re-routing -- will ultimately reprogram individual processes behind the scenes via intelligent automation, relegating finding a song on Napster to a nice distraction en route.
IT’S THE INFRASTRUCTURE, STUPID
The distributed nature of peer-to-peer environments implies that gaining critical mass, or market liquidity, will be an expensive proposition. The real business in the short term will be in providing infrastructure and services rather than in stimulating supply or demand in the market. Efforts to capitalize on early p2p hype and catalyze market demand atop today’s immature infrastructure will be tantamount to laying track before a locomotive powered by the network effect.
ASP = #1 P2P TLA
Friction indicates demand. The inherent decentralization and lack of management in a p2p environment creates an opportunity to sell management into the p2p equation. A number of untapped revenue opportunities exist to enhance peer-to-peer networks via value added services and the ASP model. Low hanging fruit include: 1) account management services, such as allocating unused computer resources 2) taxonomy creation to lower search costs, 3) content quality controls, or 4) Akamai-style speed delivery controls. All can provide immeasurable value to peer-to-peer environments if vendors step forward to provide them.
IF CONTENT IS KING, WHO’S PAYING FOR THE KINGDOM
One school of thought maintains that content is evolving from a paid-for-product into a subscription service. The notion of paying for content becomes the exception rather than the rule and a wide spectrum of managed content services will proliferate via p2p environments. Another school maintains that subscription models will be difficult to sustain, as the Web has thus far proven, save for unique and time-related content such as the Wall Street Journal. For commodity consumer content such as music, photos, videos, games, software code and more, it will be difficult to sustain a subscription model in the face of p2p environments whose participants are as much opponents of content piracy as they are practitioners of it..
QUOTES OF THE NIGHT
"P2P is a neater way to share, but it's a poor man's solution to networking."
"In many ways, with P2P it's game over. Nonetheless, p2p is primitive... a solution in search of a problem which is driving aggregation of content to a commoditized zero return."
"We need some metering or else we'll have tragedy of the common."