The story of Niklas Zennstrom and Janus Friis, the men behind Kazaa, Skype and now Joost, is a remarkable one that writes large so many lessons about the modern web and its impact on business. There are lots of interesting thoughts and notions that marketeers can take from their experiences and I have tried to capture a few in this longish article. The second half will follow next week...
Those Clever Scandos (TCS) - What Those Clever Scandos (TCS) Friis and Zenstrom, have achieved with Kazaa, Skype and now Joost gives the marketing industry clues about the future. The first thing you must understand is what TCS have done. At the broadest level, they looked at an industry, saw the centralised monster sitting at its heart and thought, “how can we never ever deal with that?” In the music business it was the labels. In the telecomms arena it was the operators. In TV, the big hairy incumbents are studios and broadcasters. TCS’ answer was to create some software that allows individuals (and the super-duper computers now sitting in our homes) to take on the job of distribution - by joining them all up. Which may all sound a bit dull. But when a human, social dimension was added where people could chitter...
...chatter and gossip about what was happening the results were explosive. Two giant branded services, Kazaa and then Skype, were born, which wreaked havoc in their respective industries and propelled TCS into the global super-rich. And no one is betting against Joost doing the same in TV.
Of course people have always shared music videos and other digital odds and ends but not at the extreme rate and ease that has become possible with the advent of what the Skype founders call 3G P2P technology, or the (slightly evil sounding) Global Index.
Nodes – So Dull
Behind this incredible piece of logistical escapology is the dry business of nodes and their slightly more glamorous relations – supernodes. In network engineering, nodes are the things that make up networks. Supernodes are exactly the same but do more work. In traditional computer networks all traffic (aka data) is routed through one of the aforementioned central monsters, that often come with shareholder-driven corporations lashed to their backs. The magic of P2P is that the traffic has no central point. It flows around a ‘mesh’ network where every node is linked to every other node. And as that mesh grows, any centralised mega-beast finds itself like Gulliver - struggling to stand as the grassroots thicken.
But make no mistake, just because they are happening below ankle level doesn’t make those micro-connections insignificant. Kazaa has been downloaded more than 250m times and Skype has racked up 170 million users. (By the way, Bittorrent also works like this and has created a file-hungry community 80 million strong, enough to give Microsoft palpitations when a few cracked copies of Vista popped up on it shortly before the main launch).
The More The Merrier
Also, P2P networks are really, really cheap compared to their predecessors. As the Skype website explains, “By decentralizing resources, P2P networks have been able to virtually eliminate costs associated with a large centralized infrastructure.” Which is the equivalent of very slowly raising a middle finger to the telecoms business and saying, ‘we can do what you do - and we can do it for free’. To rub salt into the wounds of the old guard P2P networks don’t even need big marketing budgets. They promote themselves through word of mouth and the fact that the more people join in, the merrier the experience.
The Old Guard
Not surprisingly, the old guard aren’t very happy about all this. After all, if you are sitting on a piece of kit that has taken 100 years to put together (eg the telecoms business) and are happily collecting the monopolistic style dividends that it delivers, you aren’t going to applaud the sight of customers knitting together their own exchange.
Of course, many commentators say they should have seen it all coming. Jeff Jarvis, the respected US media pundit, puts it like this: “They were closed castles that kept their communities outside….so the people have gone to build their own social structures — which they clearly always wanted.” Jarvis is talking about newspapers but he could easily be talking about music, telecomms or TV.
The backlash from the old guard has been every bit as charged as the technology TCS unleashed. With Kazaa very much front of mind, the music industry sent out battalions of rabid lawyers to destroy anything with a passing resemblance to a P2P network. The culmination was the famous US Supreme Court Ruling in 2005 that shut down file-sharing site Grokster. But although many thought that ruling was the end of mainstream P2P, it really only meant the clever operators cleaned up their acts, including TCS who had already sold up and moved onto Skype.
Part Two Here...