SharkJumping

True Story - A friend came by this evening to discuss some new business concepts, and my initial response was that I was excited to hear what he was thinking about, as long as it did not involve a new business around inserting audio ads into podcasts.  Imagine my surprise when he, of course, indicated that it was exactly what he was proposing.  JUST STOP IT

This literally marks the 5th conversation I have had within the past 4 weeks with either an investor or an entrepreneur about entering this amazing zero billion dollar business.  Outside of the obvious hype around the overall podcast sector (or blogcast as they amusingly call it at Microsoft), let's discuss the issues involved:

1. The overwhelming leader in 3rd party Internet ad insertion, Doubleclick, just sold for approximately $500M in total enterprise value, much of which was the non-DART related division.  Who can name any other player in the sector?  So unless we assume that the podcasting ad business will be much larger than the overall Internet ad sector, or that Doubleclick was sorely undervalued, that would appear to place a ceiling on the concept, especially for any player besides the leader.  (Note - my brother Kevin was the CEO of Doubleclick until its recent sale)
2. Podcasting would appear to be subset of the Internet-connected PC business, meaning that you must have a device to connect to a PC to get a podcast.  The closest analogue in the Internet -connected PC business is Internet radio since podcasting is essentially time and space-shifted Internet radio, which according to the Edison Research/Arbitron report Internet and Multimedia 12, has a monthly audience 8x as large as satellite radio, but which has an almost ad market associated with it, almost 10 years after the sector started.  So, if it's at all related to Internet radio, or more likely, a subset of it, it's going to really small.
3. It gets worse - podcasting is not going to be legal for most mainstream music in the near term since it's clearly not covered under any statutory rates, so the overall market is limited to non-music podcasts.  As one label executive candidly put it, "we regard podcasting as file sharing in sheeps clothing".
4. Unlike advertising key words or banner ads, any podcasting ads will not have any easy way to click through or provide even basic feedback on whether they were heard or not because you listen to them offline.  Yes, one can eventually implement some type of WM10 Janus-style system where the exact listening pattern is tracked on the device and then reported back next time it syncs, but there is still the non-click through issue, and the Janus technology doesn't work all that well, and is not present in most devices at this time.  You can argue that normal radio advertising doesn't have direct feedback, but advertisers often hold Internet advertising to a higher standard because they can do so.
5. The most likely podcast advertisers are current radio advertisers, and the vast majority (85%) of that market is so being able to aggregrate enough 94114 area code (for example) podcast listeners to be able to effectively market the local car dealership to them is going to take a long time.
6. There are obvious players in the category already - Audible has announced its intentions to monetize this space, Google & Yahoo would logically extend their RSS and key word expertise to the category as might Apple as the true category leader, and there are multiple start ups which already which have indicated they want to be in the sector.

I am not anti-podcasts, as some friends of mine have indicated.  It just seems that the hype over the viability of ad insertion businesses has quickly grown excessive, even by Silicon Valley standards, so that converstions are now reaching what I used to call the Long Tail pitch - it's not a venture or entrepreneur conversation unless we all mention the Long Tail (or podcasting ad insertion) at least once - there are simply too many obvious barriers to this being a meaningful business for a start up.