iTunes is the eBay of Podcasting

A friend pointed out an article in our local Boulder newspaper today about a local Podcasting business called ClickCaster. I don't know any more specifics about this company than what is in this article, but from my read I'd say  ClickCaster will have a hard time making much of a business with their current model. I pursued an idea in the Podcast space several months ago - and after pushing and pulling on it every way I could (and getting some very good advice from my VC friends) I abandoned the business. I thought I'd share my analysis of why, in my opinion, Podcasting is not ripe ground for a start-up.

First, I think all these podcast searching/enabling business models are flawed in similar ways (this is the point that my VC friends impressed on me). Perhaps these businesses can create a nice little niche business, but the real bucks are going to go elsewhere.

For instance, Apple has a new, relatively inexpensive software called Garage Band where the Mac controls all the sound mixing etc. With a single click you can upload your recording (podcast, or even song, anything audio) to your .Mac account - a service owned by Apple - and presumably to iTunes. Garage Band and the rest of the iLife software does many things that ClickCaster claims to do. I don't think Apple is going to be less dominant, as he states; rather I think they will become even more dominant in the Podcasting space. It's possible, perhaps even likely, that Apple will get challengers on the iTunes side, but they own podcasting and desktop software seems better positioned to take this market, rather than service-based businesses.

Second, assuming that there is a niche for service-based business models in the podcasting space, ClickCaster has to deal with Odeo and many other competitors. Odeo is a venture-backed company, and is listed in the Boulder Daily Camera article as one of his competitors in this space. There are - by my rough count - eight VC-backed Podcast companies very similar to ClickCaster. These companies have raised 10's of millions of dollars. You don't want to be caught competing against that with shallow pockets.

Next, iTunes has a terrific podcast network, where you can subscribe and automatically load your iPod with Podcasts. It gets deeper every day, and it's tightly integrated with iPods.

Finally, service businesses on the web tend to be "winner takes all" businesses. Just look at eBay - nobody ever uses Yahoo Auctions, because eBay has all the users. If you have the users, you take the whole thing. iTunes has all the users (+90% I think was the number published last month), and a Band or Commentator wanting to use Podcasting to get their message out is going to go where the users are - and that ain't ClickCaster network, or even Odeo for that matter - it's iTunes.

Podcasting is fun, empowering, and really could take off, but I don't suspect that podcast enabling service-based companies are going to be very successful.

Comments

[Scott Converse]

Daniel,

Interesting thoughts. To be honest, I've had many of the same ones. There's no doubt there are challenges, but I believe they're challenges we can overcome. I'd like to share some thoughts and address some of your comments.

When Google started, the vast majority of VC's thought their focus was too limited. And no one could see how they'd make money. They had many competitors and they weren't even the first ones in the market. No need to outline where Google is today.

Are there alot of companies getting into the podcast space? Yes, many. But only a few are taking the pure Web 2.0 approach ClickCaster is. A web based service (no software to download) and a complete suite of services. Saas (Software as a Service). And we believe that model is the model that, long term, is going to win.

We think there are two things that really need to be focused on. First, an incredibly easy to use product with great design and the right set of functionality, and second, great and diverse content. These two things feed off each other. If you make it easy to do, people will come. We're seeing it now. We're averaging several thousand unique users and around 30,000 page view per day. It's not stupendous, but it's also not bad for a still in development beta product.

Regarding VC involvement, you’re right. The VC community is leary. Odeo, for instance, has gotten some funding, but not alot. Primarily because it's founders are funding much of it themselves. PodOMatic , like us, is self funded by it’s founders. PodShow is the only similar company that’s gotten real VC funding (about US $8 million) but they’re concentrating on the second half of the equation (content) and not spending much time on the most important part to get things started (the actual product). Most of the other VC funding in this space is around companies trying to do analytics or aggregation (directories). This is something we like. We're building our sevrice in a way that allows any of the analytics companies to easily plug into ClickCaster. And aggregators, by nature, are doing a lot of the directory work for us since podcast directories are, by nature, open and sharable.

Which brings me to Apple. You’re also right that they’re the 800lb gorilla. They currently have about 78% of the US MP3 player market, and about 55% worldwide. And it’s the tight integration of iTunes and the iPod that’s made them so successful in this space. Today they dominate, but they’re also repeating many of the same mistakes that caused them to lose the OS wars with Microsoft in the 80’s. I know, I was worked for Apple in Cupertino from the mid 80’s to the mid 90’s. It was a sad sight to see.

They have a closed architecture that not only discourages 3rd party development, it actively slaps it down. The Macintosh computer is really just a sophisticated copy protection scheme for their operating system. The iPod, iTunes, and their FairPlay DRM combo is pretty much the same thing. And their FairPlay DRM scheme is starting to wear thin on it’s users. Ask anyone who’s every tried to move there music from the locked in iTunes/iPod combo. It’s onerous in it’s operation. I’m sure you’ve heard that France (an entire country!) is passing laws aimed specifically at banning the lock in Apple currently has.

It’s great (for the monopolist) when a market is first forming- you control everything, but over time, closed systems controlled by one company, eventually, lose leadership. In the hyperactive world of music and media, that process happens at an even faster pace.

Apple’s Garageband software (free, with every Macintosh) makes the creation of a podcast much easier than it used to be. It’s great stuff, but it has one major flaw: It only works on a Macintosh. That’s somewhere around 3% of the worlds computers. If you’re a Mac person, hey, you’re set. If you’re part of the other 97% of the worlds computer users, Apple’s tools for creation aren’t available.

And ‘the rest’ of the world is who we’re after. We know we can’t win over the religious Macintosh hordes. We’re not trying to. What we are doing is building a platform that runs completely on the web, can be used to create great content with simple, elegant and powerful tools and allows you to find and subscribe to just about any podcast based content you can imagine (audio or video) in a way that you control and that you listen to when you want, where you want. And we’re building it to work with iPods and any other MP3 player on the market (including the One Billion MP3 capable phones that will be sold over the next 36 months worldwide).

The business is there. It lies in the audience that podcaster’s shows create and the advertisers that want to reach that audience. It lies in providing increasingly powerful services and tools for different levels of podcasters. And it lies in helping give people a voice in a world were millions of individuals often feel they no longer matter. ClickCaster gives everyone from my dad telling stories of his time in the Navy shortly after the surrender of Japan in WWII to the fortune 500 company using podcasting for internal training, and everything in between.

And if there’s one thing I’ve learned in life it’s that the experts, often, don’t have a clear view about what’s next. They know a lot about what was, and about what is, but they seem somehow semi-blind to what’s next.

The podcasting world is just getting started. Give it some time. It WILL be big. Very big.

Scott Converse
Founder & CEO
ClickCaster
www.clickcaster.com
scott@clickcaster.com