Can P2P Become a Legitimate, Ad-Supported Marketplace?

This week I spoke at the DCIA P2P Advertising Upfront Discussion in Los Angeles, which was part of Digital Hollywood. I spoke to a bunch of industry professionals trying to create a legitimate, ad-supported marketplace using Peer to Peer (P2P) networks. It was an interesting opportunity because, as I mentioned to them, P2P is sort of a "dirty word" in advertising circles, for the same reasons that social networking is not yet a mature medium: the content. In social networking people are afraid their brands will come up alongside inappropriate content. In P2P they're afraid their brands will be associated with an illegal and/or inappropriate activity.

The fact is that the P2P is quickly becoming a legitimate atmosphere for brands, though there will be no quick fix and no silver bullet to dominate this category.

In order to make this a reality, we must first discuss the audience for P2P. There are two primary components to the audience. The first is the people who love P2P. These folks are heavy users of these networks and they probably rarely, if ever, pay for music. They feel that music and video content should be free and they are probably loyal to one service at a time. The second audience is people who hate P2P. These people tried to use these networks but hated that they were bundled with all sorts of spyware that had a negative impact on their computing experience. These people believe that P2P is not worth the hassle, and they will happily use iTunes or some other digital service. They may even still go to the store (imagine that)!



Neither of these targets is 100% against P2P. They are all open to it, so long as there is a safe, free and easy solution. This means there is certainly an opportunity to create a real business here, if done correctly. My headline here is that you need to give the people what they want, not what you want them to have, in the user experience.

The two primary areas for advertising in P2P platforms are audio and video. In audio we have a number of competing models: pay-per-download (iTunes, Amazon), ad-supported graphical (Spiralfrog, Q Trax, Ruckus), ad-supported audio (We 7) and subscription services (Napster, Rhapsody). In video we have one primary model, which is ad-supported video, like commercials (See Vuze, Babelgum and Veoh). There are a few other opportunities being tested and of course each platform has search, but search is a targeted opportunity here, unlike what it is in a general online manner.

Video seems most easily understood because the model is like TV. They are primarily using pre-roll, mid-roll and post-roll videos that are basically commercials. In some cases people are playing with overlays in Flash or some other interactive formats. These work and are easy to see taking hold. The question here; will any of them amass a single audience of critical volume, enough to garner strong advertising budgets? The answer is no, though the definition of critical mass requires us to understand that the overall audience is fragmenting and you may never get more than a 10% share of the total audience inside one single service. Consumers are in control and they will dictate when, where and how they will interact with content.

Audio content is where the problem lies and where the most innovation is required because the models here are the most immature at this time. In some cases, like QTrax, the user will only be shown content that is officially licensed. The problem: you can't keep an audience when you only show them part of the answer! We know that pay-per-download won't be the sole mode,l simply because too many people are used to getting their content for free. Radiohead has taken the biggest step towards innovation in this model by asking consumers to pay what they like, but even they cannot control the file after it's been downloaded once, and they don't profess to want to do so, either! Not many bands, maybe 5% of the total marketplace, can use that method of delivery.

Ad-supported graphical efforts are interesting, but they do not work in the environment where music is played. Most music is put on play and then the user stops looking. If they kept looking, then we would be back to the video format! Plus, most music is not played on the PC, where the graphical efforts can be maintained. Pandora has done a great job of utilizing this model thus far, running beautiful full-page skins of advertisements, but the user cannot share and the user is not always on the page... they are doing work and listening in the background. What Pandora does have going for it is the rating function, which brings the eyeball of the consumer back regularly. This means that the graphical units have the chance to be viewed, unlike many other streaming sites and unlike the way that many P2P networks are set up.

Additionally, the user interface in the ad-supported graphical is clunky. I downloaded some songs on a couple of the P2P web sites and the only way to play them easily was to run a Windows Media Player button that was embedded in the Web site. I couldn't create a playlist or interact with my downloads very easily. One thing to keep in mind when creating an interface for an ad-supported model is that it needs to be easy, or the general consumer won't use it.

The models are not there, but with some tweaking and some patience I do believe we'll see this model succeed for at least a portion of the audience. Some people will pay for songs while others will be offered content that supplements the songs, thereby providing a forum and an interface for graphical advertising. In the meantime, start doing your research into the platform, and see if your brands will be interested in the space!

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