Podcasting for dollars
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by David Shabelman
TheDeal.com
11, Nov 2005
Ali Partovi, CEO of Garageband.com, believes the future of radio advertising resides in the ubiquitous iPod. "There's an entire generation of consumers that don't own FM radios anymore. They own iPods," he says. "I call them Generation I."
Partovi argues that the one place where FM radio still exists is in the car, but soon his Generation I will be listening to their iPods in the car. "As the population gets older, there will be a decline in FM radio audience as that audience shifts to podcasting," he contends. "As that audience shifts, the advertising dollars will follow."
It's a compelling argument, and one that venture capitalists are beginning to put their cash behind. Partovi says VCs understand that a large shift in advertising dollars into podcasts won't take place for a few years so they're investing now while audiences are being developed.
Podcasting's potential lies in its ability to allow subscribers to listen to what they want when they want, but its usage has taken off in part because of the popularity of blogs. "Whereas blogging grew very organically, podcasting has been adopted by a lot of bloggers so it grew even faster on a built-in platform to promote it," explains Brad Bowers, founding partner with New York-based BlackInc Ventures LLC.
Venture capital firms have noticed. Garageband.com's Partovi says he hopes to announce a round of funding this month after talking to an endless number of VC firms over the past few months. The San Francisco-based startup, which up until now has been a place for independent musicians to post and listen to music, is in the process of introducing a podcast recording service at Gcast.com.
"Right now we find ourselves in a position where the challenge is to reduce how much time we're spending on raising money and turning away investors," he boasts. "We have so much interest, the challenge is how to reject all of the interest received without offending anybody."
But Eric Rice, co-founder of Plano, Texas-based podcasting publishing service Audioblog.com Inc., adds that he's discovered venture firms are tough negotiators. He says his company so far has been reluctant to secure venture funding to bolster its U.S. operations because the terms offered have not been favorable.
"We hear from a lot of VCs, and we take them on a case-by-case basis and listen to their terms," he says. "So far their terms have not been reasonable."
But Audioblog did secure an undisclosed amount of funding from Transcosmos Inc. of Seattle, the U.S. investment arm of Transcosmos Japan, and Tokyo-based streaming-content delivery firm J-Stream Inc. in September to launch its podcast and videoblog service and portal in Japan, South Korea and China.
Rice says it made sense for the company to team up with Japanese partners who better understand the Asian market. And because Asia's mobile communications market is more advanced than the U.S.'s, the experience his company picks up will benefit it down the road in the U.S.
Audioblog's funding round followed two others completed in August. Odeo Inc., a San Francisco-based company that has a catalog of podcasts and provides technology for podcasters, received an undisclosed amount of funding from a group that included Charles River Ventures of Waltham, Mass., and Amicus LLC of San Francisco. And San Francisco-based PodShow Inc. raised $8.85 million from a trio of Silicon Valley venture firms: Kleiner Perkins Caufield & Byers, Sequoia Capital and Sherpalo Ventures.
Ram Shriram, founder of Sherpalo, knows something about developing new and innovative companies. He was an early adviser to executives at Google Inc. and is a founding board member of the Mountain View, Calif., search juggernaut. Shriram said he thinks PodShow has a bright future mainly because its founders, Adam Curry and Ron Bloom, bring with them years of radio industry experience.
Curry is a former "VJ" at MTV, the cable television music video station owned by Viacom International Inc. that captivated an earlier generation of music fans and still remains popular with teenagers. Bloom, who was instrumental in securing the funding, is a former chairman and CEO of interactive marketing firm Think New Ideas Inc. of New York, a consultant to investment banks and venture firms investing in technology companies.
"A lot of the popular radio shows, like NPR, and TV shows like 'Family Guy' are going to be available in podcasts," says Shriram. "I give Adam Curry and Ron Bloom credit for seeing this as an interesting way to deliver content."
Cupertino, Calif.-based Apple Computer Inc. is helping out. Back in June, Apple announced that its iTunes software would come with a podcast directory of 3,000 free audio programs. Less than a month later, Apple said its iTunes customers had subscribed to more than 5 million podcasts, and by November the size of Apple's podcast directory had doubled to 6,000.
No wonder venture investors are now scouting the podcasting terrain. |
