Peer Pressure - Internet/Web/Online Service Information

Industry Standard, The, Sept 11, 2000

A person-to-person network can complement your Web business.

Q. Ever since Napster became the talk of the town, peer-to-peer networks are all you hear about. But how does my Web business fit in?

A. By definition, peer-to-peer means there's no central server. Individuals connect directly to each other's computers and exchange digital goods (software, games, music, videos), instead of connecting to a central Web site (a server) to get them. In a sense, p-to-p is anti-Web site.

The popularity of these networks does not mean that Web sites will go the way of electronic bulletin boards. No matter how wildly popular peer-to-peer networks become, it's unlikely they'll replace Web sites. More likely, say experts, the two will coexist and even interact.

Web businesses can dip their toes into the p-to-p waters in many ways. Los Angles-based Scour began as an online search engine for multimedia content on the Net. As file-sharing started to take off, Scour developed Scour Exchange, special downloaded software that people use to access multimedia files both on Web sites and on other people's hard drives. Scour plans to integrate this functionality into its Web-based search engine.

Meanwhile, new mutations of peer-to-peer businesses are being dreamed up all the time. Mountain View, Calif.-based Autonomous Zone Industries is currently beta-testing Mojonation. The service lets individuals earn money (a special currency called mojo) by donating their idle computing resources (bandwidth, cache, disk space, CPU time) to others on the network.

Even eBay is investigating peer-to-peer possibilities, according to an interview with eBay CEO Meg Whitman on News.com. Connecting buyers directly to sellers seems like the next natural step for a company that's already built an avid community.

The simplest way to get involved is to set up shop on a peer-to-peer network. Instead of looking at these networks as competition for customers, consider them sales channels that complement your Web storefront.

Right now, p-to-p commerce has been limited because none of the popular networks, such as Napster, Gnutella and Scour, has transaction capabilities and everything on them is essentially free. But this is changing. While Napster and Scour would not comment on whether or when they might implement payment features, new players are already filling the void.

Lightshare, a Palo Alto, Calif.-based company, is preparing to roll out a commerce-enabled peer-to-peer network this fall. A business joins the network as a peer, just like any individual would, and sells its selection of goods to the community. Payments can be made by credit card or through person-to-person payment systems like PayPal. According to Clarence Kwan, Lightshare's CEO, several businesses are participating in the beta program, including music labels, movie studios and software makers.

Moreover, says Kwan, the "network effects" of his business model are advantageous over Web site-based commerce. When a person buys an MP3 from a site, for instance, the transaction is complete. But if a person buys an MP3 from a vendor on Lightshare's network, that person can resell the track to a friend over the network. Each time the track is sold, the original seller collects a royalty. To tap into this network of customers all you need is a PC to host flies and an Internet connection. (Kwan recommends broadband to accommodate multiple visitors.)

While many p-to-p networks are more like bazaars of mislabeled, virus-infected files, the advent of commerce-friendly p-to-p networks will make them more secure and accountable. Many, including Scour President Dan Rodriguez, predict that peer-to-peer file-sharing applications could become the next Web browsers, as new features are incorporated.

What's clear is that p-to-p networks will not eliminate but add to the Web. Online surfing is increasingly about browsing not only Web sites, but also a sea of hard drives.