A Random Rant by The Famous Brett Watson, 03-May-2001.
In Peer to Peer Takes an Interesting Twist I discussed some of the interesting implications of a program called ShareSniffer, a novel variation on the concept of peer to peer file sharing tools. Apparently there was enough click-through on that link to attract the attention of Kerry Rogers, co-founder of ShareSniffer Inc. and author of the program, because he sent me the following email.
Brett,
I read you article on ShareSniffer. Very well done. No one has brought up the issue you did.
My name is Kerry B. Rogers, ShareSniffer author. I have to agree with you on the "choice of money-making methods" comment at the end. I really had no choice. My investor threatened to pull his money unless we charged the way we did.
Just curious, do you have any other suggestions that would solidify ShareSniffer's presence (that you would offer)?
Thanks,
Kerry
As it happens, the market pressures on and financial viability of ShareSniffer were subjects that also struck me as interesting when I wrote the original article, but I decided to restrain myself to the other issues for the sake of what little brevity I could muster. But since you ask, I do have some thoughts on the market forces surrounding ShareSniffer. What follows is the response I sent to Kerry.
Kerry,
Thanks for taking the time to comment. One caveat with regards to any comments that I make here: I'm not actively involved in any P2P-type applications at the moment, so I speak as an outside observer on the matter: I have not seen ShareSniffer in action. My perspective is sure to change somewhat if I actually get involved with such applications.
Having said that, let me expand a little on the ideas I introduce in the second-last paragraph of my article. Not only is "rentware" an off-putting scheme for the average end user (although not, I believe, for the average business), ShareSniffer is a classic example of a network-effect product. It has a slight advantage over most network-effect products in that you can participate in the network without actually owning ShareSniffer, but the only people who are likely to create an Internet-accessible read-only SMB share are the ones that know about ShareSniffer.
The issue with network-effect products, of course, is that they increase in value with the number of people who are actually using the product. A telephone system with only ten users is limited in its usefulness, and only of interest to people who might want to contact those ten users. A telephone system with ten million users, on the other hand, is likely to be useful to something like a million times more people, and thus be a million times as valuable. You have to buy your way into any network-effect market. Microsoft knows this very well and plays the game like a champion: they'll get into a market at a price where they will make substantial losses, banking on an increase in the market itself (coupled with their control of that market) to give them massive long-term profits.
So by charging anything at all for ShareSniffer, as opposed to trying to give it away for free at every opportunity, you're working against its long term success. In order to be a Microsoft, you have to get into the market at a loss, become the de-facto standard tool in the field, and then start profiting. By the time you've become the standard P2P tool, you don't need to charge very much to make a large profit because you have such a massive user base, and your development and distribution costs do not increase proportionally.
I see two major threats to ShareSniffer should it prove successful: Microsoft, and Free Software. Microsoft doesn't like other software companies having control of de-facto standards. They like to control the standards; they are control freaks. If ShareSniffer is wildly successful, expect Microsoft to add an equivalent function into the next release of their operating system. It will raise far fewer eyebrows than integrating a browser into the system, and face it: if Microsoft pulls that stunt on you, you will lose. The reason that ShareSniffer can work at all is the ubiquity of Microsoft's operating system and their associated file sharing protocol. But that same ubiquity will eat you if you get too big for your boots.
Any scheme which attempts to ride Microsoft's coat-tails will result in obscurity, assimilation, or defeat. If your product never gains enough market share to be worth worrying about, then it's obscure. That doesn't mean that you can't be financially viable, but you'll never be secure. On the other hand, if you are wildly successful, Microsoft will notice you, and then you have one of two options. If you are lucky, Microsoft will buy you out — the assimilation option. Take their first offer even if it's lousy, because if you refuse it you face option three: defeat. If you can write ShareSniffer, then so can Microsoft, and they can become a de-facto standard just by putting the program in their operating system. Of these three, the assimilation path is likely to be the most financially rewarding, but none of them are very good long-term propositions.
Free Software, on the other hand, may well be just as much of a threat. If ShareSniffer becomes the de-facto standard, and that standard is perceived to be a proprietary one with you as the gatekeeper and toll collector, then the Free Software community will build their own road. One of ShareSniffer's great strengths as a P2P tool is its lack of centralised control, but that same lack means that you won't have much leverage over competition. Consider AIM: it's become a de-facto standard in instant messaging, and AOL are pulling a Microsoft on the protocol, trying to break its interoperability with the Free Software alternatives that are springing up. They have some leverage in that particular fight (although I believe they will ultimately lose) because AIM is a centralised system and they can stage their fight at the server side. If some Free Software nut decided that the world needed a Free version of ShareSniffer, you'd have no such leverage as far as I can tell.
Part of your problem with regards to the Free Software issue is that you have a populist application. It's an attractive application because it empowers individuals directly, without being reliant on the nice behaviour of an amoral corporation or some such other weak point. It is much better than Napster for precisely that reason. But this works against you in terms of selling software: a populist application is much more suited to a Free Software project, written by the people and for the people. If you want a good market for selling software, then aim at the business market where they have yearly budgets allocated to software expenses and little concern for access to source code.
So all in all I'm not going to be much help to your business plans. The only way I think that ShareSniffer can be successful as an application in its own right is by being entirely decentralised (which it seems to be), and entirely Free (which it most certainly is not). Being entirely Free makes it much harder to be profitable, of course, especially given that the target market (private individuals) aren't likely to want to buy "service contracts" for it. Voluntary donations could work (when you have a million or so users, it doesn't take too much generosity on their behalf to create a fair amount of cash), but the big hurdle there at the moment is the means of payment. Further, when you have a Free Software project, you are more likely to get contributions in the form of labour than in the form of cash: other people will do bits of your job for you, gratis. Great for the program, but not good if you want cash.
The one final alternative I can think of is to offer some kind of "membership". This would involve setting up some kind of web-based services as an adjunct to the ShareSniffer program, and using the ShareSniffer program as a means of creating brand awareness. It would be hard to get the details right, but as a rough outline the benefits of membership might include a sharesniffer.com email address and web space for putting up stuff in relation to the files the member is sharing. This could include a level of automatic integration with the ShareSniffer program, but not in a proprietary way — you must rely on brand awareness, not closed protocols. ShareSniffer could also host discussion fora in relation to all matters P2P, and although the members and non-members would have much the same access to these discussion groups, the members could be denoted with a gold star or some such like. Apparently valueless things like that can sell well if they aren't too pricey.
I could expound further on those ideas, but I'm sure this is much more than you were expecting already.
Regards
TFBW
In case you are curious what Kerry thinks of this, his response included the phrase, "I can't find a single point that I'd disagree with." Does that mean ShareSniffer will soon become Free Software and attempt to utilise my risky and unproven business model? I doubt it! Even so I await future developments, if any, with interest.
Author: The Famous Brett Watson