SpeedBit's Incredible Shrinking Download

The Israeli company says its new accelerator can download a film inside 20 minutes. If true, this could revolutionize the online video industry

Downloading a movie or a TV episode over the Internet and watching it in the comfort of your own home may become the next major consumer trend. But even with a high-speed Net connection, a full-length movie clocking in at 1.5 gigabytes still takes hours to buy and download.

Industry analysts concede that this remains the major roadblock preventing online video from catching on as quickly as music did. After all, even compressed movie files are at least 100 times larger than a song. Now an Israeli startup called SpeedBit says it has devised a solution that can dramatically accelerate video downloading over the Net—potentially opening the door to much wider use of the technology.

SpeedBit, based in Herzliya and Haifa, plans to roll out its new video accelerator by Apr. 19. The technology is a work in progress, with constant improvements eked out as the company devises new ways to perk up performance. Already, says co-founder and Chief Technology Officer Idan Feigenbaum, SpeedBit has managed to shrink the download time for a full-length feature to about 40 minutes over a 5 Megabit-per-second (Mbps) Internet connection. At the higher speeds available in some countries, that could be slashed to 20 minutes or less.

A Boon for Internet Video

"Reducing the time to download movies to around 15 minutes will definitely lead to a big upsurge in penetration of the trend," predicts Andrew Hargreaves, an electronics industry analyst at Pacific Crest Securities, a Portland (Ore.) investment bank.

That should also come as welcome news to big companies that have bet on Internet video. Retail giant Wal-Mart (WMT) launched its much-anticipated video download service in February, following the 2006 introduction of videos on Apple's (AAPL) iTunes. Amazon.com (AMZN) and Microsoft's (MSFT) MSN also now offer streaming or downloadable videos.

But Wal-Mart has reported that only 3,000 movies were downloaded in the first month of its service. And though Blockbuster (BBI) looks likely to introduce video downloads by the end of this year, it is already cautioning that the business probably won't take off for another year or two.

Streaming in Multiple Channels

SpeedBit's video accelerator could help ease those growing pains. An early, free version of the product designed to improve delivery of streaming videos from YouTube (GOOG) was rolled out in March, and nearly one million copies already have been downloaded. "Our accelerator deals with the common problems of buffering and freezing and dramatically improves the quality of the viewing experience," says Feigenbaum, a 29-year-old, self-taught computer programmer.

How does it work? Conventional video delivered over the Internet essentially travels in a continuous stream from the source to the destination—that is, from the seller to the customer. (The distributed architecture of the Net and the intervention of content delivery services such as Akamai Technologies (AKAM) mean that the path is actually far more complex than this.) By contrast, SpeedBit uses complex algorithms to optimize available bandwidth—in effect, downloading different chunks of a video simultaneously over multiple Internet connections, rather than in a single stream.

All of this is invisible to both content providers and customers.

Video sites such as iTunes or YouTube don't have to be specially adapted to support SpeedBit, and users only have to download the software to enjoy its benefits. The first version of the download accelerator, due out next week, is adapted specifically to work with iTunes. SpeedBit aims to release versions in the near future that work on videos sold via other distributors. And Feigenbaum's 30-person tech team is scrambling to squeeze download times even further.

Profitable Premium Versions

The technology behind the video accelerator was originally developed by SpeedBit to shorten software downloads. The company's Download Accelerator Plus (DAP) software program, introduced in 1999, has already amassed nearly 140 million users. Israeli Internet guru Joseph "Yossi" Vardi, an investor in SpeedBit and one of the original backers of instant-message pioneer ICQ, says SpeedBit's success with DAP "…was the second time in my Internet career that I've witnessed such huge numbers of users."

The potential for the video accelerator could be even greater. For one thing, the basic YouTube version will remain free. SpeedBit used a similar business model for DAP, where it gives away the basic tool and makes money by selling premium versions with better performance and enhanced features such as privacy controls. Customers will have to pay for versions of the SpeedBit video accelerator adapted to sites such as iTunes, Wal-Mart, and Blockbuster, but the company hasn't yet disclosed the price.

Little Competition—Yet

For a startup with such grand ambitions and potential, SpeedBit keeps a pretty low profile. It raised a mere $1.5 million in funding back in 1999 from Vardi and local investment house Pitango Venture Capital when it was founded by Feigenbaum and his father. "Most of the money is still in the bank since we've been profitable almost from day one," says Ariel Yarnitsky, chief executive officer at SpeedBit, who previously held the top spot at Mirabilis, the company behind ICQ. Yarnitsky is tight-lipped about financials, saying only that SpeedBit booked "several million dollars" in revenues last year and is looking to double that, or more, this year.

As for competition, SpeedBit doesn't appear to have much—yet. Security Pacific analyst Hargreaves believes that industry giants such as Microsoft and Apple are likely trying to solve the digital downloading problem. But in the meantime, SpeedBit is here with a solution that could set it up for big growth—or make it a prime acquisition target.

Business Exchange related topics:Online VideoIsrael BusinessBusiness Innovation

Before it's here, it's on the Bloomberg Terminal.