MegaUpload: A Warning to Users of Free Services

The potential loss of millions of user’s legitimate data is a wakeup call for those who rely on free services for business and other data protection services. The Internet has dramatically changed the way we do business but it has also created a self-serving mentality that everything is free for the taking, even for business use.

In today’s difficult economic climate, businesses are looking for ways to cut costs and many of those have resorted to free or very low-cost solutions for their Internet needs. There is nothing wrong with finding ways to cut costs but those cost cutting measures are putting many businesses in serious jeopardy. Stealing clip-art from a Google search result or using free online storage services is a dangerous business decision.

On January 26, 2012, the FBI, along with other policing agents in other countries shut down the file-sharing site MegaUpload immediately cutting off access to files stored by millions of users world-wide. According to the arrest and search warrants served on MegaUpload, it is accused of facilitating the illegal exchange of copyrighted material. Although the company is based in Hong Kong, those apprehended were arrested in New Zealand and some of the servers that hosted the files were located on United States soil, thus allowing the United States the opportunity to prosecute the operators of the service, the ultimate result is that millions of people are without access to their data today. It is very likely that the data will be lost before a final determination is made in this case.

The issue with MegaUpload for users is in the business model used by that service to provide services to its members. This business model is the same business model that drives popular sites such as Google, Facebook, Twitter and thousands of other websites that people have come to rely on. The business model is to bring as many eyeballs as possible to a targeted advertisement. The more traffic viewing the advertising the more successful the company is.

There are two ways to drive traffic to create the revenues that keep these massive operations going. The first is the legitimate work done by the investments of large amounts of money in traditional advertising to create awareness of the website. And, the other, is the quasi-legitimate and in many instances the illegal process of creating traffic. Thus we have the problem with SPAM and the prosecution of MegaUpload.

The times when someone could launch a website and traffic would significantly increase is long gone now that each website service is competing among millions of others. It is just not possible to promote a website without investing in advertising.

In the case of MegaUpload, the prosecution alleges that the service was used to share illegally copied movies in violation of copyright laws. For those that are wondering how can that be a criminal offense and why the FBI is involved must have missed the FBI warning that comes up right before you start watching a movie. In case you wondered if that warning served any purpose whatsoever, you now know that the FBI does, in fact, throw people in jail for illegally copying movies. Whether the US government will prevail in the prosecution of this company is still up for debate. What is not is that MegaUpload was used by millions of users.

Not all of those users committed a criminal offense and used the service to store legitimate files. Those users, nonetheless, are without access to their files today. They may never get them back.

According to the prosecution, MegaUpload had a small percentage of users who paid for the service of storing files in the cloud. The rest of the revenues for the company were made from advertising. In order for the advertising to generate sufficient revenues for the company, millions of eyeballs had to see them. And this is where the problem started for the legitimate users.

The legitimate users are not sufficient to generate the traffic needed, thus the company had to rely on the eyeballs looking for illegally copied movies to generate the necessary traffic to the site. Whether the company was complicit in this will be eventually determined by the judicial process.

The legitimate users whose files are not accessible and who may ultimately loose them have only themselves to blame for their predicament. Those businesses that continue to rely on online services for free services will eventually find themselves in the same predicament. Someone has to pay for the servers and the Internet connections to those servers. Relying on free website whose business model is to give away free service is unsustainable and will eventually collapse. How will that look to your company’s customers? Saving a few bucks today could and up costing you your business in the end.

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