Why did the great "BT download" technology fail?
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Last April, Bob Delamar and Jeremy Johnson became co-CEOs of BitTorrent. Delamar and Johnson are cousins. Delamar is a Canadian in his forties with a mustache who admires Japan; Johnson is a network engineer from San Diego. Together with the other two, they formed a four-person team and took control of the company, planning to turn BitTorrent into the "next Netflix." BitTorrent has been working hard to become the next Netflix. In 2003, software engineer Bram Cohen invented the BitTorrent protocol (commonly known as "BT download"), which uses an efficient software distribution system and P2P technology to share large files (such as a movie or TV show) and enables each user to provide upload services like a network redistribution node. Its characteristic is that the more people download, the faster the download speed, because each downloader provides the downloaded data to other downloaders for download. In this way, the faster the upload speed, the faster the download speed. In a very short time, the BitTorrent protocol has become a new revolutionary technology. In 2004, Bram Cohen and Ashwin Navin founded BitTorrent based on this. They believe that the BitTorrent protocol is great and will create a great business. However, from the beginning, BitTorrent has a major problem: piracy is rampant. Because the protocol is open source, BitTorrent cannot stop the rampant piracy. For 12 years, BitTorrent's investors, presidents and founders have been fighting against piracy. They have tried many strategies (developing enterprise software and entertainment business) to make people believe that although criminals use the BitTorrent protocol to engage in illegal activities, BitTorrent is just a tool, a really great tool, and you can use it to do really great things! In fact, what they said is absolutely right. The company's website shows that every month, 170 million people in the world use the BitTorrent protocol; every day, the BitTorrent protocol drives 40% of network traffic. Facebook and Twitter use it to assign updates to their servers, Florida State University uses it to distribute large scientific data sets to research institutions, and Blizzard Entertainment uses it to let players download World of Warcraft. Yet, despite the technology’s impressive capabilities, turning it into any kind of business has been elusive. By last spring, BitTorrent had tried twice to become a media company, and both failed. In 2007, BitTorrent Entertainment Network was launched, creating a movie music store that never made a profit and closed a year later. In 2013, BitTorrent Bundle was launched, a competitor to iTunes and Amazon that allowed artists to publish their work directly to fans. In 2014, the company even announced plans to release its own original work: a science fiction drama called Sons of the Machine. But early the next year, BitTorrent abandoned that strategy. Some startups are born lucky, like Facebook, with the right time, right place, and right people, and they have a smooth journey. Most startups are not God's favorites: they raise funds based on an idea or a team, and move forward slowly for several years or even more than ten years, trying to find excellent ideas, customers, partners, and find ways to adjust and improve. Their investors are very patient at first, but then they are very tired, and then they simply withdraw. Their executives are replaced, founders leave one after another, and a few continue to persevere. They are "zombie companies." BitTorrent is one of the "zombie companies." For more than a decade, it has been working hard to find ways to make money with technology as a tool and try to turn technology into a business. Last year, Delamar and Johnson were still planning to turn technology into wealth once and for all, but the reality was cruel: they spent millions of dollars, but the company was almost bankrupt. I interviewed many former and current employees, investors, and related artists of BitTorrent and wrote the following story. As a child on the Upper East Side of Manhattan, Bram Cohen is smart, introverted, and strange by nature. He graduated from Stevenson High School with mediocre grades and entered the University of Buffalo, but dropped out after two years. Cohen said in an interview with Fortune magazine: I know I'm a weirdo. A lot of important things happened in my life, but some of them I didn't realize their importance when they happened because I didn't know how to empathize and understand others at the time. Cohen has Asperger's syndrome (a social disorder similar to autism), but he has never hidden it in public. He disclosed it to investors at the initial fundraising meeting. "It's probably one of the hottest topics he talks to strangers about," one investor told Bloomberg BusinessWeek. Although he is not shy about revealing his illness, he doesn't like to shake hands, wear shoes, or speak because of it. In his mid-20s, after finishing his job at a dot-com company, Cohen began writing code day in and day out. He wanted to solve a problem that had plagued every programmer since the birth of the Internet: how to transfer large files. Nine months later, the problem was finally solved, and the open source protocol BitTorrent was born. In 2004, Cohen, his brother Ross Cohen, and Ashwin Navin, a former employee of Goldman Sachs and Yahoo, began to build a business around the protocol. They raised $8.75 million from Dole Capital Management (DCM) and planned to build a marketplace like eBay where developers could sell UWB content. They would make money through advertising or by charging developers. In 2006, the venture capital firm Accel led the second round of financing. From the beginning, the company had personnel problems. At the beginning, Ross Cohen, who was in charge of the engineering department, left. In 2007, Cohen resigned as CEO and became Chief Science Officer (a position created by Cohen), and the CEO was replaced by a new employee. In 2008, CTO Eric Klinker became CEO. Klinker was very good. He had sharp technology and outstanding management skills, and won Cohen's respect. The original business concept did not take off, and the company was always looking for other successful models. In 2008, after the third round of financing, the company admitted that it had not "made significant progress" and agreed to a recapitalization. The company returned $17 million to investors and only raised $7 million. Navin left, but the company continued to struggle. However, many of the company's executives and decision-makers were exhausted. They still couldn't agree on where the company should go. Some thought the company should focus on developing technology businesses and building products that people loved. They developed a product called Sync, which was a decentralized version of Dropbox. Others wanted the company to transform into an entertainment company, allowing creators to send content on the company's platform. Because of the long-term disagreement, the company was in a stalemate. In early 2015, BitTorrent laid off 150 employees, accounting for a third of the total staff. After the layoffs, Accel investor Ping Li decided to exit. He had been supporting BitTorrent since 2006. At that time, he was very excited about the company's plans and believed in the company's potential. He invested $20 million in one fell swoop. But after nearly a decade, he began to see no way out for the company that he once believed in so much. Li said: Now, ten years later, we are no longer excited about any of their plans. We think the best way is to let go. But then another investment team, DJS Acquisition, stepped in. They were familiar with BitTorrent because team member Jeremy Johnson was close to Klinker. The two began working at Internet service provider Excite@Home in the late 1990s, and later worked together at an Accel-backed startup. In the fall of 2015, DJS Acquisition received an investment from Accel in BitTorrent. Normally, this was an unusual deal. Johnson and his cousin Robert Delamar, along with two other people, founded DJS Acquisitions. They had no money to offer, but they were willing to pay a $10 million promissory note in exchange for an investment in BitTorrent by Accel and DAG (DAG was a minority shareholder in BitTorrent and made its first investment in 2008). This investment was unusual, so why was it so significant for Accel and BitTorrent? For one thing, the DJS team planned to turn BitTorrent into an entertainment company. Although the plan has not yet been realized, DJS can bring new blood and enthusiasm to BitTorrent. On the other hand, Accel may not have a better choice. Insiders said: Cohen tried to buy part of the company's shares in his private name, and Accel's Li also said there was no more reasonable choice. But in any case, this transaction allowed DJS to smoothly take control of part of the company's power. Before this, the team had never invested in any company. According to four people with first-hand information about the company: There are currently five seats on the board of directors of BitTorrent, and DJS inherited two of them; it also owns more than 50% of the company's preferred shares. In other words, DJS controls BitTorrent. Among the four members of the DJS team, Johnson and Raj Vaswani are co-founders of Silver Spring Networks, and the other two members are employees of Pacific Future Energy, a Vancouver startup. The team's goal is to build an oil refinery in British Columbia. Professional lawyer Delamar is a senior advisor to this project, and Samer Salameh is executive chairman. A few months after DJS joined BitTorrent, Klinker resigned as CEO and the board hired Delamar and Johnson as co-CEOs. In June, BitTorrent abandoned its media and enterprise business, spinning off its product, Sync, into a separate company called Resilio. The company, run by Klinker, sells freemium software to companies. Meanwhile, Johnson and Delamar quickly realized the opportunity for BitTorrent to become a media company. Delamar planned to open an office in California and began to split his time between California and Vancouver, while Johnson also established an engineering office in his hometown of San Diego. In addition, they began hiring, and between January and June, the company's total headcount grew 26%, with most of the new hires in marketing and sales. They also hired some former DJS employees as senior executives, including several who also worked at Pacific Future Energy. Salameh, the current CEO and executive president of PFE, is currently serving as an advisor to BitTorrent and has received $154,000 in consulting fees. Delamar, who is still a senior advisor to PFE, hired Jeremy Friesen, PFE's chief investment officer, as executive vice president of corporate development. Friesen now works at both companies. The two moved quickly to try to break into the Hollywood market. BitTorrent plays a major role in the spread of movies and music by giving artists control over the release of their work and allowing them to share it with a wider audience. They hired Missy Laney, who manages the Sundance Institute's Artist Services program, which is designed to attract filmmakers. They built a new platform, BitTorrent Now, to allow artists to release their work directly to fans. They hired the son of a CNN anchor to start a new online news site. They created the Discovery Fund, which uses $100,000 to fund 25 outstanding artists. They even spent $50,000 to print the company logo on a truck to advertise the company. Even though BitTorrent's advertising revenue is clearly declining, Delamar is spending a lot of energy to convince Hollywood creators that BitTorrent can attract a large audience and make money for creators. In August, in an email to Tom DeSanto, the creator of "X-Men", Delamar said that if DeSanto's next work is released through BitTorrent, he will be able to make $1 billion. By the end of the summer, it turned out that the strategy wasn’t working. Even as the company’s revenue was falling, the two had used more than a third of their existing funds. For several years, BitTorrent’s cash reserves had been relatively stable, at around $33 million, according to the board’s financial documents. But starting last year, the reserves began to decline. In the first half of last year, the company spent a total of $10.1 million; in July last year, the reserves were $14.9 million, and by the end of last year, there were only more than $8 million left. Despite the company’s turmoil, Cohen rarely wavered. In the past few years, his main focus has been on BitTorrent Live, a cross-platform streaming live platform. Because it is developed based on P2P technology, the video quality changes according to the number of viewers, that is, the more viewers, the higher the picture quality and smoothness. This summer, the company released a beta version of the BitTorrent Live app. In October 2016, the promissory note promised by DJS came due. As it turned out, DJS could not pay, and the promissory note was just a bad check. According to rumors, DCM's David Chao paid the money, took control of BitTorrent shares, and demanded three seats on the company's board. As a result, BitTorrent fired its new CEOs. Now, the company's CFO Dipak Joshi is serving as interim CEO. Delamar and Johnson left, the company's California studio and San Diego office closed, and many employees were laid off. The Discovery Fund, which had promised to support artists last August, also died. It sent an email to all applicants to inform them that the project was cancelled. For BitTorrent, the future is still unclear. I had the opportunity to interview Marco Weber, the creator of "Sons of the Machine", who said that he had completed the creation of the series and recently considered selling it to traditional media platforms. Fans may be able to watch this sci-fi drama one day, but most likely it will not be broadcast on BitTorrent. Almost everyone has a different story about why the company failed: infighting, financial profligacy, bad decisions... But everyone agrees on one thing: Cohen built a very good technology . Perhaps the lesson from BitTorrent's experience is that sometimes technology is not a product, not a tool to make money, but just a very outstanding and excellent technology. Just like Vint Cerf invested in the TCP/IP protocol, but he didn't make a fortune from it. In addition, to succeed, startups must have great ideas about products and services, and also great ideas about business models. Both ideas are indispensable. But even though BitTorren's development road is bumpy, like other "zombie companies" in Silicon Valley, it is not dead yet. Not long ago, Cohen's BitTorrent Live has landed on the app store. As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
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