Peer Impact's designation as a P2P service comes primarily from the ability of its subscribers to be rewarded, with credit for future purchases, for selling music files to other members.  In most cases, it uses Windows Media along with Windows Media DRM to protect licensed files that come directly from major and independent labels. 

The service also utilizes a "swarming" technology that breaks up large files into pieces, sends them to users in the most efficient way, and recombines them.  This technology is similar to BitTorrent, but it is actually one that Wurld Media has developed and used for other purposes in the past. 

Subscribers to Peer Impact can get credit awards in two ways.  If a user leaves a PC connected to the Internet, the system may use it as a source when another user wants to purchase a file that the user has on his machine.  The system chooses sources based on a variety of factors, including geographic proximity to the purchaser and the source user's history of past purchases. Peer Impact calls this "Passive Distribution."

The other way for users to get credit awards is by acting as "NoiseMakers," i.e., by promoting their collections of content through various means that Peer Impact provides, including chat boards, email, and fan sites. NoiseMakers get higher award levels than the passive distributors described above.  The NoiseMaker scheme is an expansion of the scheme that PassAlong Networks has used in its music service on eBay.  It is also much like the affiliate networks that Amazon, iTunes, and many others have used for quite some time.

Peer Impact's approach differs significantly from that of Mashboxx and the revamped iMesh, two other services that are lumped under the "legitimate P2P" designation; it is far more similar to that of Weed, which has existed for over a year but has no major-label licensing deals.  Mashboxx and the new iMesh, which have yet to officially launch, are true file-sharing networks that enable users to share any files they wish.  They use acoustic fingerprinting technology to detect copyrighted works and allow music publishers a range of choices of what to do about the sharing of such files, such as charging, substituting a low-fidelity version, etc. 

In other words, Peer Impact is really more like an embellishment on now-standard download services like iTunes, one that is primarily relying on extensive viral marketing techniques to differentiate itself from the pack.  Therefore, the biggest question for Wurld Media is whether those NoiseMaker tools and sales commissions of up to 10% will be more attractive to users than the lower commissions offered in affiliate networks like those of Amazon -- which is threatening to launch its own digital music service this year -- and iTunes.  Passive distributors get commissions similar to those that affiliate networks offer, meaning that Peer Impact will offer similar commissions for doing less work.

We expect the rhetoric about "legitimate P2P" to die down over the next year or so, as centralized services add more sharing-oriented features and as users of these new services find that the one feature that they are all missing is the "free" part.  When that happens, Peer Impact's new take on viral marketing will be easier to assess for what it is.