Ideas about how to monetize P2P activity – as opposed to trying to sue it and its users out of existence – have been discussed for years, and several companies have attempted or are attempting to do it. Thus far, the results haven’t been all that encouraging. Within the past month, BitTorrent, Inc. announced that it is abandoning its paid P2P offering, and P2P search advertising service SkyRider pulled the plug on its business. There were certainly flaws in the way that both of these companies executed their services, but nevertheless it got me thinking: Can file-sharing be monetized effectively over the long-term? Or is it a strategy that, while appealing in theory, is destined to fall short in practice?
With millions of Internet users engaging in file sharing (as I type, BitTorrent network The Pirate Bay has 23 million users alone), and no evidence yet that label-sanctioned free download services like SpiralFrog and We7 will entice a significant number of music consumers away from the unsanctioned P2P networks, finding a way to generate real revenue from P2P activity represents a huge opportunity for artists, labels, and entrepreneurs.
A P2P monetization model that has gained momentum recently is compulsory music subscriptions administered by ISPs. The idea here is that all Internet users pay a monthly fee – some would call it a tax – to their ISP which entitles them to legally download and share as much music as they want. While I understand the appeal of this model, I’m not convinced that requiring everyone to pay for the P2P sharing of some is the best solution. I would prefer to see a system where only those who actually engage in file sharing are affected.
One such alternative approach being pursued by companies like Grooveshark combines P2P music discovery with a digital sales platform. Grooveshark users upload music they own and can search and stream songs uploaded by other users for free. If users want to download a song, they can purchase a DRM-free mp3 for 99 cents, with a portion of that revenue going to the label as well as the user(s) who uploaded the song. I believe this model has a lot of potential to drive music discovery and sales, but I worry that the per-download fees could be a turn-off for many users.
Some other monetization models that revolve around advertising are being introduced and, on the surface at least, seem promising. For example, a company called Brand Asset Digital allows content owners to seed P2P networks with content, which they can use to drive downloaders to digital stores or other online destinations. The company also recently launched a product called P2PWords, which is similar to Google AdWords: Advertisers can buy keywords, and whenever a user searches those keywords on a P2P network, links to sponsored content appear in the search results. And then there are companies like Auditude, which recently announced a partnership with MySpace and MTV under which Auditude’s platform will automatically identify any MTV-owned videos uploaded by MySpace users, display advertising against those videos, and split the revenue with MTV. It’s not hard to imagine something similar being developed for music on P2P networks.
However, it remains to be seen whether P2P advertising could generate sufficient revenue to keep advertisers, labels, and artists happy and interested. P2P networks may have millions of users, but a large audience does not necessarily translate into large advertising dollars. Social networking sites like MySpace have struggled to capitalize on advertising, and it’s unclear how advertisers would fair in a P2P environment. Would P2P users be receptive to advertisements and buy links, or would they ignore them? Would advertising and sponsored content be too disruptive to the user experience, and ultimately just drive users to seek out alternative, ad-free P2P networks? Is the P2P environment conducive at all to viewing/watching/listening to ads?
What do you think? Is some sort of advertising-based P2P monetization model feasible? Or is it a pipe dream? I’m eager to hear your thoughts.