WSJ plays up P2P Faults

From: Gregory Alan Bolcer (
Date: Wed Apr 04 2001 - 17:16:22 PDT

Infrasearch folded into a development deal for $10M
Popular power closes it's doors
Engenia repositions themselves out of hte p2p space.
Groove looking to move the conversation beyond the technology.

"Napster is more of a social than a technical phenomenon" Edward Jung
explaining why you can't recreate the excitement of Napster by tranferring
Napster-style technology to other areas.

LimeWire and BearShare not sure if can survive a record
industry crackdown.

Flycode deeply into X-rated content or copyrighted material
or both.

United Devices only have 3 customers.
April 4, 2001

                Peer-to-Peer Party Comes to a Halt
                As Companies Morph or Disappear

                By Lee Gomes
                Staff Reporter of The Wall Street Journal

                It's starting to look as if the end may be near for the
                "peer-to-peer" fad.

                Peer-to-peer, or p-to-p, is a decentralized approach to
                computing and the Internet whose best-known incarnation is
                Napster Inc., the music downloading service. Last summer,
                there was an explosion of interest in the new field from Silicon
                Valley programmers, entrepreneurs and venture capitalists.

                Some said p-to-p -- a somewhat amorphous term that means
                different things to different people -- represented nothing less
                than the future of the Internet, and would soon be used for all
                manner of services, from Yahoo-style searching to eBay-style
                auctions. Millions of dollars were invested in p-to-p, scores of
                companies were founded and an ocean of ink was spent by the
                press to chronicle the burgeoning movement.

                Overlooked in all the excitement, though, were a few problems.
                No one knew whether p-to-p really worked, at least in the way
                some theorists were proposing. Or whether there were many
                uses for it that didn't end up violating copyrights, the charge
                leveled against Napster. Or if there were, whether companies
                could make any money on them.

                Now, with technology funding in a funk after the bursting of the
                Internet bubble, those problems suddenly don't seem so small
                anymore. And the p-to-p party, which once looked like an
                exception to the dot-com downturn, seems more like a wake.

                Among the recent setbacks:

                    InfraSearch Inc., a widely publicized Web-search
                    company whose founders once boasted that p-to-p
                    would be as big a business as the telephone, was sold
                    last month at a fire-sale price after it was unable to raise
                    more money. Last summer, a group of prominent
                    investors, including Netscape co-founder Marc
                    Andreessen, poured millions of dollars into InfraSearch,
                    which quickly became the blue chip of the p-to-p world.
                    But Sun Microsystems Inc. snatched it up for $10 million
                    -- a sum that doesn't even register on the Richter scale of
                    Silicon Valley deals -- and then promptly folded it into an
                    existing research-and-development project.

                    Another well-known p-to-p company, Popular Power
                    Inc., closed completely last month after also striking out
                    in raising funds. "We got caught in a bad time," sighs
                    co-founder Marc Hedlund.

                    And then there are companies formerly known as
                    peer-to-peer purveyors, which now say they no longer
                    like the term. "We've listened to the market and
                    repositioned ourselves," says a spokeswoman for
                    Engenia Software Inc. A spokesman for Groove
                    Networks Inc., the company founded by Lotus Notes
                    creator Ray Ozzie, says, "We clearly rode the p-to-p
                    wave, but the sooner we move the conversation beyond
                    the technology, the better."

                Silicon Valley watchers say sociology as much as technology is
                needed to explain the rapid rise and fall of the p-to-p fad.

                "The whole p-to-p hoopla is emblematic of the mad rush to find
                the next big thing in technology," says Bill Burnham, a venture
                capitalist with Softbank Venture Capital. Edward Jung, a
                former top software architect at Microsoft Corp., said p-to-p
                boosters were trying to recreate the excitement of Napster by
                simply transferring Napster-style technology to other areas. But
                since Napster is more of a social than a technical phenomenon,
                "a lot of people were led down the primrose path," Mr. Jung

                One of the difficulties in assessing the state of p-to-p is
                semantic. Most people define the term as a computing scheme
                in which information is stored on many PCs, reducing or
                eliminating the need for a central repository like a Web server.
                In the market, however, the phrase has come to describe at
                least three entirely distinct categories of technologies and
                companies. None of them, though, are playing out quite as well
                as boosters had once hoped.

                The first category is Napster and the Napster clones. Purists,
                for starters, note that the music service is only partially p-to-p
                because it relies on a central database to show which users are
                sharing music files.

                Napster, of course, has well-known legal problems. A new
                crop of Web sites, such as Lime Wire and BearShare, let users
                trade free music and other files by using a purely p-to-p
                software system known as Gnutella. But it remains to be seen if
                these companies can escape a record industry crackdown
                down the road, and if they do, whether they can turn themselves
                into profitable businesses.

                There is another group of Napster-like companies calling
                themselves "legal Napsters" that say they are trying to heed
                copyright laws and charge for music swapping. But without free
                music, it's hard to get anyone to log on.

                Flycode Inc., a Napster-like system originally named
                AppleSoup and unveiled to great fanfare last July, had just a
                few hundred users logged on Tuesday afternoon, many of them
                swapping material that was either X-rated, copyrighted or both.
                "There has to be a value proposition to get p-to-p members to
                aggregate, and other than music, people haven't yet identified a
                good one," says A. Joon Yun of Palo Alto Investors, a
                venture-capital firm that holds a stake in Flycode.

                A second flavor of p-to-p involves what has long been called
                "distributed computing," a technique in which hundreds or
                thousands of computers work together to solve a big problem,
                such as cracking an encryption scheme. That can be a useful
                setup, but is a different job than a Napster-like scheme of
                passing music or other files from consumer to consumer.

                Intel Corp., ever eager to put millions of its microprocessors to
                good use, has been using p-to-p in the distributed computing
                sense since last summer. Tuesday, the Santa Clara, Calif.,
                company announced plans to employ millions of PCs in a
                philanthropic cancer-research effort with partners that include
                the American Cancer Society, the National Foundation for
                Cancer Research and Oxford University. The effort involves
                having PCs in homes and offices use their idle moments to
                research the cancer-fighting properties of millions of molecules.

                A number of companies have also been started in this part of
                the p-to-p market. But they are finding it can be slow going.
                Popular Power, for instance, folded. United Devices Inc. of
                Austin, Texas, has been around for a year but so far has just
                three customers -- though co-founder Ed Hubbard promises
                that many more are on the way, saying many companies are
                interested in it for biotechnology research as well as Web
                development work.

                The final p-to-p category involves companies that want to use
                p-to-p to solve problems besides sharing music files, such as
                InfraSearch's Web searching. Most of these companies, though,
                aren't purely peer-to-peer; instead, they use p-to-p ideas
                combined with traditional approaches. A number of start-ups,
                for instance, are working on software to let people collaborate
                on office projects, or run programs over the Web as well as on
                local PCs. These companies include Groove Networks, as well
                as Mr. Jung's company, OpenDesign Inc.

                But many of these have been labeled "p-to-p" for the scarcely
                remarkable fact that their programs will occasionally direct two
                computers to talk directly with each other. Executives of the
                companies admit they went along for the p-to-p ride for public
                relations reasons.

                "P-to-p is going to be used very broadly, but by itself, it's not
                going to create new companies," says Michael Tanne, chief
                executive of Xdegrees Inc., a start-up using p-to-p ideas as
                part of a way to more easily locate files on the Web. "It's a
                technology. But the companies that will become successful are
                those that solve a problem."

                Write to Lee Gomes at

Gregory Alan Bolcer        |  | work: 949.833.2800
Chief Technology Officer   |   | cell: 714.928.5476
Endeavors Technology, Inc. | efax: 603.994.0516     | wap:  949.278.2805

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