Peer-to-peer gets personal

(Business 2.0 Magazine) -- Sending Grandma a video of baby's first steps via e-mail is a bit like taking a horse and sleigh over the river and through the woods to her house: tediously slow and prone to freezing.

In the YouTube era, our hard drives are stuffed with bandwidth-hogging home movies, music, and photos that we share with friends and family using technology built to transmit short text messages. Now a slew of companies are stepping in with a solution to the broadband bottleneck: personal peer-to-peer file sharing.

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But companies such as AllPeers, Pando, and Zapr aren't waving the pirate flag. Unlike the original Napster and Kazaa file-swapping services, which were targeted by the music industry for allowing massive copyright infringement, this new breed of file sharing is largely a private affair, designed to let people trade files one-to-one or among a selected group.

Some services, such as MediaMax and Myfabrik, avoid file-sharing technology altogether by allowing subscribers to store their digital goodies on a central server. The advantages over e-mail: fewer limits on how big files can be, and it's all just a click away for you and your friends.

The demand for such services is growing. Every day YouSendIt, for instance, transfers more than 30 terabytes of files among its members - the equivalent of the contents of about 1,000 laptop computers. MediaMax, which is operated by a San Diego company called Streamload, sends 3 million files among its members daily and stores 650 terabytes of their data.

Venture capitalists, meanwhile, are pouring money into personal file-sharing startups. In the past two years, Fabrik has raised $12 million in funding, Pando has scored $11 million, and YouSendIt has pocketed $5 million.

Most of the newer services have little revenue to speak of yet. The exceptions are Streamload, which claims $3 million in revenue for 2005; TransMedia's Glide, which is on track to bring in at least $3.5 million in subscription fees this year; and YouSendIt, which should hit $1 million. Only TransMedia claims to be profitable.

Each service has its own twist. The website-based ones let you upload files and then send links to your friends to view or download them. MediaMax, for instance, lets you store 25 gigabytes for free and then collects $5 to $30 a month, depending on how much you upload. Fabrik's recently launched Myfabrik offers 1 gigabyte for free and then charges a monthly fee of 49 cents per gigabyte thereafter. It encourages people to use the service for all the pictures and music they want to share on social-networking sites like MySpace.

On the peer-to-peer side, it's all about file transfers. AllPeers's software is an extension to Firefox that turns the browser into a file-sharing service complete with a buddy list showing who's online and what they have to trade. AllPeers, based in London and Prague, is backed by the same venture capitalists who invested in Skype (now owned by eBay (Charts)).

Meanwhile, when you send a file using Pando, the recipient gets a regular e-mail with a small attachment. By opening the attachment, that person connects with every other Pando user who is online and also has that file, along with a central backup server.

As for Singapore-based Zapr, you simply drag files to a list of people you want to share with, and Zapr sends each of them an e-mail with a Web link. When they click on the link, they can download the files from your computer as long as you're online.

"The link is our currency," explains Zapr chief marketing officer Michael Liubinskas, a former executive at Kazaa operator Sharman Networks. "Since it's private," he adds, "this is about personal file sharing for family and friends. We wanted to build something legally safe."

So how do these companies plan to make money?

Some are trying to sell subscriptions to heavy users, such as graphic designers or photographers who need to send large files to clients. Others are dabbling in advertising, which is none too surprising given that the typical customer at this point is a tech-savvy 18- to 34-year-old male - in other words, marketing nirvana. YouSendIt CEO Ivan Koon, a former Adobe executive, wants to build his company into a Web-based document management service for small businesses.

Other file sharers plan to license their services. Streamload sells a white-label version of its product to companies like Sprint (Charts) spinoff Embarq, which in turn will make it available to their DSL customers. And Intel (Charts) will be offering TransMedia's Glide with future ultramobile PCs.

Pando CEO Robert Levitan thinks his startup can make money as a low-cost delivery network for high-definition movie trailers and other digital content. Most of these services can also be integrated into MySpace pages, blogs, and RSS feeds. AllPeers wants to let people sell as well as share media.

With so many players out there, a shakeout is inevitable. "It will be really tough for smaller, no-brand companies to survive," notes Michael Cai, a broadband analyst with Parks Associates. Then again, in the public file-sharing realm, YouTube was a no-brand company - until suddenly it wasn't.