Here’s the story that ran in the Merc yesterday about the hot San Francisco file distributing company BitTorrent, and the backing by DCM’s David Chao — who as we’ve mentioned before, is on a bit of a roll.

Note BitTorrent’s position in the far right top of the Web 2.0 meme map in our previous entry. Another thing we didn’t mention is how BitTorrent’s founders are positioning this company to make its protocol a new underpinning for the Web, replacing the less efficient Http.

We should note that Business Week ran a piece recently, in which George Zachary, a partner at Charles River Ventures was quoted as saying that other means of distribution, including podcasting and so-called Really Simple Syndication, or RSS, are eating into BitTorrent’s potential market. “I don’t think the major media companies are ready to embrace P2P,” says George Zachary, a partner at Charles River Ventures. “I could have invested and I didn’t.”

We ran this by BitTorrent’s Ashwin Navin, during a visit to his office at a restored warehouse south of Market in SF. (There was a hole in one of the windows, there is poor Internet connectivity, a small carpet draped…

over the large cold stone floor, and well, none of the engineers are really coming in anyway. Needless to say, despite their view of the ocean, they are moving to new offices.)

And Navin smiled about this, and said that he “basically had to educate George on what RSS is.” (Counterpunch!) In fact, Navin added, you can even use BitTorrent to RSS stuff. He calls it the holy grail: A consumer see an XML/RSS feed of torrents, he clicks on it to subscribe, and it is available to him. “TiVo-like quality,” he says. (Update: Also, Navin said podcasting with BitTorrent isn’t a problem either. Apparently, Zachary’s firm already has an investment in podcasting company, Odeo, and so there may be a bit of a conflict. Though we haven’t talked directly with Zachary about this).

We should note that the new protocol aspect was a point being echoed by venture backer Chao, when we met with him earlier this week.

And one more note about Chao. He says his firm has already sold its shares in Allabout from Japan, and gotten a return of 29 times its original investment. Wow, that was fast! Also, there is another question that is beginning to brew about whether there is a new hierarchy starting to form among VC firms. Are globally active firms like DCM and DFJ beginning to replace Silicon Valley-focused firms like Kleiner on the totem pole? No evidence yet, but it is a thesis of change that Grove Street Advisors’ Clint Harris has been pounding on for quite some time (Harris’ GSA invests in many different funds). Any feedback? We may jump in later with a story on this.

Finally, a few other relevant links on topics concerning BitTorrent:

–California Sen. Dianne Feinstein says file-sharing networks should be shut down.
–The tale of two lawyers, eDonkey & BitTorrent (this gets to the difference between the two. BitTorrent pitches itself to publishers as a way to control distribution of their content. Publishers can launch and stop a content distribution campaign when they wish, and the torrents they have feed to their userbase will thus appear and disappear from the network, correspondingly. It is not so simple with eDonkey. Now, of course, if content falls into the hands of bootlegger publishers, they can use BitTorrent to distribute — but BitTorrent’s point is that its intent is not to fuel this sort of usage, and therefore it should not be banned). Also note, the point about eDonkey having to shut its offices turned out not to be true.
–There are some sites being shut down, though.