The parasite economy

There's a new software business model in town -- symbiotic plug-ins that pay for the privilege of piggybacking on the hot download of the moment.

By Damien Cave

Aug. 2, 2001 | Every software start-up wants to be the new Napster -- a program downloaded by millions, with an icon on every desktop. And every month, there's a new contender: Most recently, the buzz has coagulated around an application called KaZaA. Over the last two months old KaZaA has hit peer-to-peer critical mass: A network of 5 million people is using it to trade files of all kinds, from obscure bootlegs to raunchy porn.

KaZaA's offices also happen to be in Holland, which might make it more difficult for the U.S. recording industry to put it out of business. For KaZaA fans, the fun could go on for a while.

But that doesn't mean KaZaA's pleasures come without a price. Everyone who installs the "free" software will discover that KaZaA is not the only software program in the package. KaZaA comes bundled with no fewer than five associated applications. There's New.net, which enables browsers to "see" unofficial domain names such as .kids, .family and .shop; Webhancer, which tracks user habits and page speeds; and three others -- Cydoor, OnFlow and EZula -- that serve or otherwise assist advertisements varying in frequency, form and annoyance.

Some of these programs fall into a class labeled by critics as "spyware." Because they reside on your hard drive but automatically "phone home" to outside servers on the Net (to upgrade themselves, or retrieve ads), they can threaten user privacy and security, say critics -- raising the awful prospect that complete strangers will find out exactly what you've been downloading. Although users can usually opt out of installing them, few people choose to do so -- and in KaZaA's case, they don't always enjoy the option: Cydoor, for example, is mandatory for KaZaA use.

"When you're skulking around the hidden recesses of someone's system, placing hidden software that captures activity and sends it home to the mothership, you have the capability to do anything," says Ray Everett-Church, a well-known privacy consultant. "This includes capturing every keystroke, reading every file. It could even modify your e-mail after you hit 'send,' adding or deleting things without your knowledge. You name it, [these programs] can be designed to do it."

These potential dangers are not unique to KaZaA's plug-ins; any piece of downloaded software that uses a Net connection could be used as a monitoring device. But KaZaA is worth special attention simply because of the number of associated plug-ins, or parasite programs, as some call them. The profusion of KaZaA parasites is significant, not just because of the privacy implications, but because they are a signpost to an economic and cultural shift. KaZaA parasites pay for the privilege of piggybacking on KaZaA. Forget about venture capital, advertising revenue or consumer subscriptions as ways for software entrepreneurs to make money on the Net. In its never-ending process of evolution, the Internet has stumbled into a new business model. The age of parasite funding has begun.

The payoff might seem slim -- companies like Cydoor and Ezula pay 10 or 20 cents per download. But multiplied by millions, such pennies begin to add up to a revenue stream. And the parasites themselves become the gatekeepers of viability. Like spores of mold endlessly seeking the most popular new software applications, they grace the survivors that hoist themselves out of the Net's teeming shareware underground with cash and a certain level of endorsement. The more parasites you have, the more others regard you as an evolutionary winner. And while the relationship may be imperfect, few developers -- particularly in the white-hot peer-to-peer area -- expect a breakup anytime soon.

"Money has to come from somewhere," says Niklas Zennstrom, one of KaZaA's co-founders. "There are many people who think that everything on the Internet should be at no cost and free of advertisement -- but that is, of course, not the way that companies can operate."

Next page: The spyware scare