Podcasting

Podcasting... this is a very interesting movement. I find myself listening to more podcasts on my iPod than I do music these days and the quality is just getting better and better. Even VCs are beginning to take elevator pitches over podcast. I think podcasting is seeing a quick take-off because of the "on demand" world we live in. With TIVO and digital cable with on demand we have seen that on demand anything is what the consumer really wants. We want our food, clothes, tv, news, everything "on demand."

This want has created the podcasting craze where traditional radio is disintermediated and the consumer can now choose what shows they want and when they want to listen to them. However, podcasting is not going away. It is not just a short lived fad. In a sense, podcasting is like radio mixed with blogging and we have all seen how popular blogging has been and its' staying power. The question now is: Where is the road to profitibility?

The new media VCs are probably wondering that right now and I am sure some have pretty good solutions. Already, two of the top VCs in the world, Kleiner Perkins and Sequoia, have invested in PodShow. PodShow raised $8.5mm in their series A round led by the two giants which is a serious chunk of change for a podcasting play, or any play for that matter. With the track record of Kleiner and Sequoia one has to think that podcasting is going to work and that it is just a matter of getting the right business plan together.

Another deal that recently happened was the series A funding of Odeo lead by Charles River Ventures (another great firm). The amount of the deal has eluded me as of now but if I find out the amount I will be sure to post it.

What are the VCs looking for in a pocasting business model and why are they investing such large sums so early the game? Let's start to answer this question by looking at the similarities and differences between PodShow and Odeo.

What do PodShow and Odeo have in common?

1. Both sites enable you to create podcasts.
2. Both sites list and categorize podcasts for listeners.

Where do they differ?

1. PodShow has a partnership with Sirius which should entice good podcasters.
2. PodShow offers to help you make a profit producing a podcast.
3. Odeo appears to have a better sync system allowing podcast subscriptions.

From the similarities and differences outlined above it can be seen that PodShow is aiming to be the complete solution for podcasters while Odeo has a more listener friendly vibe. While I do like both businesses, I think that PodShow has a better shot because of their model. As far as I can see, PodShow has a clearer path to revenue creation through adverting and their partnership with Sirius. This is not to say that Odeo won't being able to create revenue with their model and, perhaps, by integrating something like PodShow's advertising plan for podcasters.

Update since original post:
I have since tried Odeo's offering and partly retract the statement above. Odeo's target appears to be the regular user and not the "pro podcaster." So, in a sense, they are going for the long tail of podcasting. The model seems to be working nicely and I think the company will be very competitive. Try the application(s) for yourself (when it is in public beta). I think you'll enjoy it. End update...

So, the VCs are looking for a complete solution for podcasters and listeners. A podcasting community platform if you will. A place where podcasters can record and disemminate their podcasts and where listeners can download them. That makes sense, but why the the large amounts of money for such an unproven model? The answer could lie in the inevitable integration of mainstream music podcasts into the mix.

As of now, podcasting has been a disruptive innovation picking up significant strength while hiding behind the shield of asymmentric motivation (i.e. the radio companies haven't been worried this far because talk radio is not where the big money is (most of the time) and they have been willing to lose some of those listeners). However, when podcasting begins to move further up market by adding music it will almost be too late for traditional radio to catch up. I believe the situation will be quite similar to the takeover of the telegraph by the phone which Clayton Christensen describes in his book, "Seeing What's Next: Using the Theories of Innovation to Predict Industry Change."

Initially, Bell tried to sell his phone to Western Union and was laughed out of their officies. He then began to issue the phone in small towns wher people lived a couple miles apart and were happy to have the phone to talk to their neighbors rather than either not talk to them or walk the few miles down the road. Western Union was not worried about this market as they provided little if no income to them because the telegraph was mainly a long distance communication device. The time came when Bell figured out how to build long-distance phones and the fact that many people had phones in their homes already meant that they just needed the long distance hook up and, there you have it, Bell hid behind the shield of asymmentric motivation and beat Western Union (this was a quick sum up to prove a point so please do not shun me for small historical errors - please read Clayton Christensen's book for more).

Anyhow, back to podcasting. It appears as if podcasting could be the next telephone with "videocasting" likely to follow (possibly a video playing iPod as well?). It will be interesting to see what other ideas come out of this medium as I am sure there is more than one way to create value from podcasting. If anyone has any thoughts or more info about podcasting please reply to my post and spread your knowledge.