BitTorrent Gets Venture Capital Boost

Legitimate use may be the key to propelling the file-sharing startup past competitors like Kazaa and eDonkey.

P2P-focused startup BitTorrent has received its first infusion of venture capital funding, an $8.75-million round from Doll Capital Management.

Developer of the popular open-source peer to peer file-sharing protocol that shares its name, BitTorrent will use the financing to fuel product development and pursue commercialization of the technology, according to the company.

The funding may help BitTorrent Inc. in a number of ways, said Nicholas Farka, marketing manager at CacheLogic.

In the short term, the infusion may help BitTorrent regain some of the footing it lost earlier in the year, when it was surpassed by eDonkey in terms of traffic.

Once responsible for about 35 percent of all Internet traffic, BitTorrent slipped when the MPAA managed to close down key tracker sites, Farka said. The subsequent attention to sites that use the protocol for illegal file sharing hurt BitTorrents user rate.

"As BitTorrent was getting slammed by the MPAA and connected to pirate activities, eDonkey was essentially under the radar, and no one was accusing them of anything," Farka said. "Since eDonkey is also easier to use, and is available in multiple languages, it rose quickly in the rankings."

/zimages/1/28571.gifOpera adds BitTorrent to its Web browser. Click here to read more.

As the protocol becomes connected to legitimate, commercial uses, it is possible that the positive attention could affect Internet traffic if BitTorrent regains some of its lost strength, Farka said.

In the long term, BitTorrent could become a formidable player in content distribution, Yankee Group Research Inc. analyst Mike Goodman said. "By steering toward commercialization, it becomes a much more likely target for venture capital," he said. "Companies like Kazaa or eDonkey, which dont have legitimate uses, cant compete."

BitTorrents software is already being used by a number of large companies, the firm said, including Red Hat Inc., Sun Microsystems Inc., NASA, Blizzard Entertainment and PBS (Public Broadcasting Service).

"While BitTorrent already has become the de facto protocol for cooperative distribution on the Internet, DCM shares our belief that BitTorrent will become the ideal platform for both independent publishers and the worlds leading media companies alike," Bram Cohen, founder and chief executive of BitTorrent, said in a release.

For client sites that use the protocol, such as BitTornado or MyBitTorrent, the effects may be less beneficial.

"Derivatives wont be affected positively," Yankee Groups Goodman said. Improvements to the BitTorrent technology to commercialize it could involve more protections being put into the protocol, pushing it further from client sites, he said.

"VCs arent going to fund something that will extend copyright infringement," Goodman said.

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