Napster has been clobbered by courts, Scour has effectively vanished, KaZaA (the Dutch Napster) has been hit by huge legal sticks and shut down.
Dozens more Napster lookalike P2P services have gone under, too, as legal assaults mounted by the record industry have exacted a bloody body count. But here's the chewy paradox: P2P definitely is not dead. "There's a great deal of vitality in the P2P space. P2P's standard-bearers may be extinct, but P2P isn't dead, it's thriving," says Ann Zieger, chief analyst at PeerToPeerCentral.com, a Reston, Virginia research firm.
"The marketplace has not quite grasped it yet, but P2P is the next logical evolution of the Internet," says Robert Hegarty, research director, investment management technology for Needham, Massachusetts-based TowerGroup. "P2P definitely is a major technology trend going forward," agrees Hitesh Seth, chief technology evangelist at ebusiness consulting firm SilverLine Technologies in Piscataway, New Jersey.
None of this means that a rebirth of Napster and its ilk is predicted, however. Analysts see a very different future for P2P: "Visionaries now are looking at how this technology can be put to use in enterprise," says Jarad Carleton, an analyst with consulting firm Frost & Sullivan in San Jose. "There is substantial potential here."
Picture the problem: a sprawling multinational has hundreds of offices, thousands of workers, and countless amounts of intellectual property scattered here, there, everywhere. In Kuala Lumpur an executive needs to see an internally-generated report on oil futures in central Asia—but where is it? London? New York? Moscow? With a few clicks of the mouse—and the right P2P technology deployed in-house—that executive will find and retrieve the report. Without P2P that might be impossible—certainly it would be time-consuming—and, right there, the argument for P2P implementations inside enterprises becomes clear. "P2P efficiently links up parties who otherwise wouldn't be connected, and that's why enterprise needs this," says Hegarty.
Who are the players? No companies have managed to stake out clear leads and the fact is that the P2P marketplace now is up for grabs—but the exciting news is that a range of small and start-up businesses are trying to grab turf and quite probably, if the analysts are right, a few of these now little-known companies will emerge as digital content stars within the next few years. Cases in point: Groove Networks, Avaki, WorldStreet, Yaga, NextPage, and Kontiki. Very different companies—their approach to the markets radically differ—but, say the analysts, each is worth a close look because among them they are defining the future of P2P.
Call Groove Networks Microsoft's best friend in the P2P space and that wouldn't be far off. Microsoft recently invested $51 million in the Beverly, Massachusetts company and the two companies announced a strategic alliance where they would work together in providing peer-based solutions to business. With impressive management (founder and CEO Ray Ozzie led the development of Lotus Notes), Groove Networks says it's already gaining traction in the enterprise marketplace, according to Andrew Mahon, director of strategic marketing.
Just what does Groove Networks offer? Its tools provide communication among individuals via the Internet without the need for a central server [See February 2002 EContent for a Profile of Groove]. It lets groups collaborate on a broad range of activities within shared virtual spaces, in real-time, or at different times. A plus: Groove Networks software can be implemented in tandem with CRM, knowledge management, or sales force automation software.
A key Groove Networks feature: its groupware tools allows employees within the enterprise to connect also with suppliers and partners on the other side of the firewall, but to do so with a high-level of security. "All data are encrypted," says Mahon. Also, collaboration takes place only among invited parties, he adds. Unlike, say, Napster, there won't be party crashers or uninvited guests—"you can filter in or out participants," says Mahon.
Even so, Mahon admits that selling Groove Networks' solution isn't necessarily fast or simple. "We are really looking for early adopters now" and, he indicates, the general slowdown in corporate IT spending has hampered Groove Network's take-off. "If this economy were more like 1998…" he sighs and leaves unspoken that in those days almost all sales of new IT approaches were easy.
This isn't to say that Groove Networks is making no headway. It genuinely is, says Mahon, with beta tests underway in multiple target markets, including pharmaceuticals, financial services, large consulting firms, and the federal government. "Our markets, by definition, are very large organizations that are decentralized," says Mahon.
A question potential customers want answered: "What will this technology do for us?" says Mahon, who elaborates that this selling cycle involves considerable education. Customers are open to being persuaded—but "they certainly are not interested in P2P for P2P's sake," says Mahon. "They want to hear the business case."
"The ability to move data around is becoming ever more important among certain types of organizations—and that's where we are focusing our marketing," says Avaki's CEO Dave Fish, whose Cambridge, Massachusetts company claims about $16 million in venture funding (the bulk comes from Venture Partners, General Catalyst, and Sofinnova) and whose pedigree includes board member Robert Metcalfe, inventor of Ethernet and founder of 3Com.
Prime markets for Avaki include the life sciences industry—"there is a lot of activity here. Time to market really matters and these companies are dealing with vast amounts of data," says Fish.
Just what does Avaki offer customers? Fish calls it "grid computing" and by that he means Avaki provides a technology that allows for linking of myriad computers in a way that users share both computing resources and data. Fish stresses that while Avaki's technology provides for harvesting unused CPU resources from computers in the grid, that's not really what Avaki is about. "Secure, shared access to information—that's what we offer," he says.
"To us P2P is all about linking people who want to do business together," says John Riley, vice president, marketing, for Boston-based WorldStreet, a company with a sharp focus on the financial services sector. The client list already has Credit Suisse First Boston and Oppenheimer Funds. WorldStreet's aim: to facilitate the flow of pre-trade information between buyers and sellers as well as inside financial institutions and between institutions and their customers. "We help firms achieve better, faster communication," says Riley.
A plus of WorldStreet's P2P technology: built-in filters allow users to sift out extraneous data and thereby avoid information overload.
The financial marketplace for P2P is potentially very rich, says WorldStreet COO Rod Hodgman, but he also concedes it's several years away from maturity. Users, he indicates, are still gaining familiarity with the technology—both how to use it and how it will make money for them.
Although WorldStreet defines its market more narrowly than do many competitors—it strictly focuses on financial institutions with high-value, time-sensitive information—at least some analysts applaud the company's focus. "WorldStreet is positioned to become the software of choice for investment managers overwhelmed with more information than they can consume," says TowerGroup's Hegarty.
"The world has become very distributed and the key problem for a business person today is that the information I need to do my job may not be where I am," says Bruce Law, vice president, marketing, for Lehi, Utah-based NextPage. "P2P is the vehicle that happens to solve that business problem." At its end, NextPage is well-funded for the pursuit of this market. In October, it closed a $13 million round (investors included Visa International, Intel, and Oak Investment Partners), lifting its funding to $49 million.
A key promise of NextPage: using its technology, employees, suppliers, partners, vendors can all access distributed information as though it were contained in one location. This produces significant gains in speed and efficiency, says Law. "With our tools you access information as though it were on your desktop," says Law. "You are leveraging your information assets in real-time."
NextPage's customer list boasts major names: law firm Baker & Mackenzie, Ernst & Young, Chubb Corporation and, says Law, "we have over 200 customers. Any company that is pursuing global projects needs this tool." [NextPage was profiled in the April 2001 issue of EContent.]
Based in Mountain View, California and founded by a Netscape alumnus (Mike Homer, a Netscape executive vice president) who has managed to land funding from other Netscape players (including Jim Barksdale and Marc Andreesen), Kontiki is a company that has been surrounded by loud buzz since its founding in August. A huge difference between it and other P2P players: its focus is squarely on speeding up and making more efficient the delivery of rich media files, says Chris Saito, senior director for product marketing.
A key reason for this emphasis: Downloading video and audio files puts severe strains on today's Internet and, says Saito, by employing P2P, Kontiki gets dramatic improvements in speed. How? Users who participate in the Kontiki network agree to allow access to specified files that reside on their hard drives. When a new user seeks to download a large file, pieces are retrieved from multiple computers—"our network optimizes around proximity," says Saito, meaning that in most cases computers nearest to the new user will be called into duty. Then those packets are reassembled by Kontiki's software, and the result for the user comes both faster and in much higher quality.
"For video, our system delivers broadcast quality," says Saito. "That is much better than competitive approaches."
Although users might worry about files drawn from other users' computers, Saito says Kontiki's security is strong: "All files are digitally signed, as are all parts of files. Security has been a key concern of ours from the beginning."
Although the focus is on rich media, don't think Kontiki is a consumer-oriented tool. It's not, at least that's not where it sees its customers. "We are selling ourself to business," says Saito, who says that digital video recording company TiVo, for instance, is using Kontiki for its online demos, and Palm is using the service to deliver informational videos to its sales channel. "Our market definitely is the enterprise," adds Saito, who says that Kontiki is a young company with a new technology and therefore, "we need to prove ourselves. That's our focus now." [For more on Kontiki, see its Profile in the February 2002 issue.]
Just when you thought P2P had abandoned the consumer market, meet Yaga, a Foster City, California start-up with $22 million in funding (InfoSpace is a key backer) and an Internet blueblood for a CEO, Chris Kitze, a co-founder of Xoom.com, a onetime CEO of NBC Internet, and a co-founder of Point Communications (acquired by Lycos in 1995). According to Kitze, Yaga differs from Napster in a couple of key ways: it traffics only in legal digital goods and it provides copyright owners with tools for getting paid. "We enable a publisher to put a file in our system and to get paid for it," says Kitze.
The underlying Yaga architecture is rooted in decentralized, P2P technologies—"a file can be in our system but it can reside anywhere," says Kitze. Using Yaga, a content owner posts his material—at least links to the songs, video, or text which will be probably be on the owner's computers—and Yaga provides both a portal for bringing in consumers and its micro-payment tools for collecting small sums from users and cost-effectively divvying them up between Yaga and content owners.
Sounds good? A hitch in building momentum for Yaga thus far has been the reluctance of owners of premium content—top 40 songs, trailers for hit movies, and so forth—to use the service. That content so far isn't being made available to third-party providers like Yaga.
How is he doing with consumers? Kitze indicates that's not his worry at the moment. Viewers will follow content, he believes, and as Yaga builds up its libraries, consumers will come. "When we have one to two million files, that will get this ball rolling," says Kitze.
Is he right? There's no scoffing at Kitze's track record—but until Yaga starts making deals with name content owners, analysts express skepticism that there will be a near-term profitable future in consumer-oriented P2P.
Might there be other companies that make their weight felt in this space? You bet because the P2P arena is still maturing: "The P2P market is in its infancy," says Frost & Sullivan's Carleton. New players may well emerge and large, established companies can be expected to pursue the P2P market as customers begin to ask for services.
What's holding up P2P adoption? Aside from the general torpor afflicting most IT spending in an anemic economy, the key enterprise hang-up is security—"P2P providers have to provide businesses with reassurance on this," says Carleton.
Another obstacle: there also has to be some old-fashioned evangelism. "The enterprise needs to hear more about the benefits of P2P. There has to be education before they will buy," says Carleton.
But Carleton adds, odds are increasing that they will begin buying. "This is the break of dawn for P2P—but it is [only] dawn. P2P is just starting to be adopted, but it will spread and probably fast."
SIDEBAR: Avoiding the P-Word
Napster isn't exactly dead—the company's remnants remain at www.napster.com and the promise is that at some point Napster will return as a paid subscription service (although no timeframes have been established)—but many inside the burgeoning P2P industry fervently wish Napster would simply disappear. Why? Napster has associated P2P with legal troubles and copyright theft and an upshot is that many in the sector now actually shy away from using the term P2P. "We don't say P2P. We do say 'peer network,'" says Worldstreet COO Rod Hodgman.
Others in the sector talk about "file sharing," "distributed content," and anything that doesn't remind listeners of Napster. "We talk about 'collaboration,'" adds Andrew Mahon, director of strategic marketing for Groove Networks. "That gets more business traction than 'peer.'"
One irony: Napster "allowed people to see the power of this technology," acknowledges Hodgman. Anybody who experimented with Napster even for a few minutes simply was blown away with what the tool could do, says Hodgman. "The power was easily seen."
Bottomline: throughout the industry, recognition is high that Napster dramatically demonstrated what P2P could do—but no voices are raised in its defense, certainly not by nascent content distribution businesses that now are in a rapid hunt for viable business models.
"P2P has a lot of connotations we are not comfortable with," says Dave Fish, CEO of Avaki—"'P2P' is not a phrase we like to use. But," he adds, "it definitely is alive and well."