BitTorrent Doesn't Need More Funding, It Needs A Business Model

By now, many sites have all reported that BitTorrent has raised another round of funding, this time totaling $17 million and putting their total raised to date close to $50 million. You really have to wonder what these VCs are thinking, putting more money into a company that has no clear business model or product offering. For all the talk of how many players BitTorrent has installed or the "platform" they have, peple still don't seem to realize it's not about how many players you have in the market and they are incorrect to think of BitTorrent as a "platform".

BitTorent is simply a protocol and is a method for downloading content. You don't make money with BitTorrent just like you don't make money with HTTP or FTP. It's simply a protocol. BitTorrent is a means of distributing software, games or video and it's that content that is being sold as the way to make money. You are making money from the content, not from BitTorrent. Or you're using it for promotion purposes to get trailers and demos in the hands of consumers.

I get the sense that people are missing the point that you can't make money with a client. If you have an entire platform that allows you to create, ingest, manage, store, deliver and track your content, that's different. But that's not what BitTorrent has. Simply having an open source client is not a means of generating revenue.

And for all the talk of how many players BitTorrent or any other company has installed, the number of installed players is not the metric to measure success or market opportunity by. RealNetworks has a lot more players installed than BitTorrent, but what has that gotten them in the video world? The size of your player installs is not as important as many in the industry make it out to be. Most users will download a new client if they want the content bad enough, so the idea that you have to have a lot of players already out in the market before you can deliver your content in that format is just not accurate. Look how many major broadcast studios started distributing their content using Move Networks when Move was just starting out and had very few players installed.

The bottom line is that BitTorrent does not know what it wants to be, does not have a clear product offering and right now, is not delivering any message to content owners on what they can offer. I speak to many large content owners all the time, see tons of RFPs and I have yet to see BitTorrent included in any of those RFPs. Content owners who want to deliver video specifically are not considering BitTorrent.

If BitTorrent made their offering into more of an Amazon type service, explained what it offers, how it works and published pricing for the service right on their website, they could generate some interest. Maybe not enough interest to translate into sizable revenue, but it would be a very clear offering in the market, and would give them a starting point.

Comments

[jhm212]

Agree with your BitTorrent analysis and you bring up an interesting point...."If you have an entire platform that allows you to create, ingest, manage, store, deliver and track your content, that's different."

Many of your prior listings spell out the 'players' that could potentially deliver this "ecosystem offering". The large CDN's, Amazon and Move Networks jump first to mind. You know this sector as well as any body, who do you see as having superior solutions to this new full-serving 'platform' market?

[Dan Rayburn]

The vendors for the ecosystem varies depending on things like in-house or outsourced solution? Enterprise or media and entertainment vertical? Intranet or public Internet?

For instance in a workflow, broadcast environment, you could think of someone like AnyStream, but in an enterprise vertical, it's more of someone like IVT and Qumu. And on the CDN side, I think that today, only Akamai and Level 3 are during a true ecosystem offering. Level 3 not complete yet, but will be soon. Other CDNs like Limelight are also offering an ecosystem offering but it is with a lot of vendors instead of in-house solutions.

You really have to look at the content, the vertical, Intranet versus Internet, live or on-demand and in-house versus outsource amongst many other variables. All depends on what "exactly" you need to accomplish.

[Homer Simpson]

Once again, Dan, you have provided clear, logical, and sound reasoning. It is hard to understand what most of these VC's could possibly be thinking; for sure they aren't going to get a 10x return.

Donuts anyone?

[Jim W]

I always forget that there even *is* a company named BitTorrent until these type of posts remind me. My NAS at home has a builtin BitTorrent client - so how exactly is a company supposed to derive revenue from that regardless of business model? I guess it wouldn't be the first time VCs have invested in buzzword business plans.

[Christopher Levy]

I have always wondered, and been quite vocal about, how a company like BitTorrent who made piracy a global threat to all of us, could overnight turn into a legitimate company with a product they report that our industry might need.

On one hand they claim they have Millions of clients on their network and then when pushed they won't divulge whether those are just native BitTorrent applications or are they BitTorrent CDN clients.

IMHO BT's technology is an also ran and the company has never shirked their known role in the ongoing piracy problem. It's amazing to see more VC's get gaffled into investing into what surely will be a fire sale in the end.

Bram I think you are an amazing talent with an incredible idea and I wish you all the best in your future efforts.

Christopher