As more internet entrepreneurs construct their businesses out of the contributions of users, questions are being raised about compensation. If Flickr’s making money selling ads beside your photos, should you get a cut? If Google’s search engine gets smarter by spying on your clicks, does the company owe you a tiny slice of its riches? The short answer to such questions is: Dream on, pal.
But when a company’s service involves peer-to-peer networking, the question of compensation becomes something more than a cause for philosophical rumination. In the European edition of the Wall Street Journal yesterday, Bruno Giussani had an interesting op-ed that described how Skype routinely commandeers users’ computers and network bandwidth to run its popular phone service. This is, of course, how peer-to-peer works, and if it were just a matter of every user making a little contribution in return for free or cheap calls it wouldn’t be an issue. But, as Giussani explains, that’s not what happens. Skype turns the computers of a relatively small number of users (estimated to be about 20,000 at any given time) into “supernodes” that consume “computer power and bandwidth at an amazing rate.” He quotes a Computerworld article that found that supernodes could “saturate 100 Mbit/second connections.” (Paul Kedrosky, on his blog, recently described what happened when his computer apparently became a Skype supernode.)
It’s a very nice set-up for Skype. By building its network on users’ machines and pipes, it’s able to “avoid massive investments and add new users at near-zero marginal cost,” Giussani writes. And in the past, its free-riding business model didn’t meet with much resistance. As a renegade operation – the Kazaa of telephony – Skype had an emotional connection with users that turned them into willing collaborators. But now that it’s an arm of a multi-billion-dollar profit-making company, eBay, one wonders if users will continue to happily make charitable contributions of processing power and bandwidth. Already, corporations are banning Skype from their networks.
Giussani foresees potential challenges for Skype. First, “since most people pay for their bandwidth, some of them may ask Skype to share the cost.” Second, user complaints (and further network expansion) may force Skype “to start deploying its own supernodes.” That kind of capital investment, Giussani ominously concludes, “would completely transform its business model.” Free rides are great while they last, but they rarely last forever.