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A New Medium Sends a Message
Podcasting finally hits the right note for  VCs – and other alarm:clock news from the land of private venture funding.

Podcasting is hot – yet many people still ask: What is it? In brief, podcasting is the delivery of audio content from the Internet onto devices like iPods, MP3 players, and laptops. Podcasting services collect the audio that subscribers want to hear and drop it into their portable devices. The medium is often tied to RSS (Real Simple Syndication) because podcasters use RSS to let their audience know when new podcasts are available. Additionally, in the case of podcasts, audio can mean music, radio programming, interviews, books on tape, or audio transcripts of blogs. Even celebrities and other notables are podcasting, including Space Shuttle astronaut Steve Robinson, who, according to NASA, recorded the first podcast from space during the recent Discovery flight.

The Podcasting phenomenon is currently benefiting from the huge popularity of Apple iPods, which has generated its own entrepreneurial segment, and Apple’s support of podcasting by introducing the iTunes Podcast Directory, which allows users to browse and subscribe to over 6,000 podcasts. Indeed, more than 6 million people have downloaded podcasts in the past year, according to the Pew Internet & American Life Project.

Podcasting has received a steady stream of media coverage in recent months – and now it appears that the venture capital community has ordained it as a hot investment opportunity. Two recently funded podcasting startups also benefit from well-known front men. Miami, FL-based Podshow is led by former MTV host Adam Curry – who helped invent podcasting in July 2004. Podshow received $8.85 million in funding from two of the biggest names in venture capital, Kleiner Perkins and Sequoia Capital. And Kleiner Perkins’ John Doerr and Ray Lane are joining the company’s board.

Another recent VC investment was made in San Francisco-based podcasting website Odeo, led by Evan Williams, who created Blogger – which was acquired by Google. Although the dollar amount of the investment was not disclosed, it was led by Charles River Ventures with Amicus Ventures, as well as angels, including Lotus founder Mitch Kapor, Excite founder Joe Kraus, O’Reilly Publishing’s Tim O’Reilly, Angel Investors’ Ron Conway, and HotorNot’s James Hong.

While much of the delivery and playback infrastructure for podcasting is in place, in the form of iPods, iTunes, and RSS, tools to create podcasts are beyond the reach of most non-technical individuals. That’s changing, though, as both Odeo and Podshow make tools for the creation and distribution of podcasts.

Meanwhile, skeptics point out that there is no business model to date. Odeo’s Evan Williams has openly acknowledged that Odeo won’t have any pricing in the first phase, noting that they want time to grow and make sure Odeo provides value before settling on pricing. In fact, since podcasting is audio-based, it can’t turn to the growing market in contextual, text-based ads. Still, traditional radio has proven that there is a market for audio ads. If podcasting continues to grow, a marketplace for Internet-based audio ads will evolve.

 

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