BitTorrent picks up $17 million as it shifts gears

Coming on the heels of our post yesterday morning about BitTorrent’s new partnerships, it has emerged that the company has taken on $17 million in new financing, according to a filing ferreted out by peHUB.

The funding is a surprise, because BitTorrent’s business hasn’t been growing as strongly as the company anticipated. While CEO Doug Walker expected strong business from video companies, who need to distribute their content, demand for BitTorrent’s peer-to-peer sharing platform has been low outside of game distributors.

BitTorrent hasn’t responded so far to inquiries about the funding, but it’s worth returning to the arguments they previously made to me. As I noted before, the company says it can subsist off revenue from game companies, but subsistence a good reason for a big round of venture funding. To justify its investors’ bet, it needs another source of income, which may be video, or another type of content.

The failure (so far) of Joost has given the best example yet of why video isn’t working for P2P startups: Users don’t like to download the plug-ins or applications that P2P sharing requires. Benefitting from that state of affairs are content delivery networks (CDNs), who send out data from centralized servers rather than swarms of users, as BitTorrent does.

Co-founder Ashwin Navin, whom I talked to a few days ago about BitTorrent, suggested that its P2P service will eventually be “more akin to Amazon S3 than Akamai”. By that he probably meant that it will aim to store data over time and deliver it on demand. But unlike either CDNs or S3, Navin said that BitTorrent will move to a subscription model, and away from metered data usage.

That could be a big benefit to companies that want to keep their bandwidth bills low; companies like PeerApp have been funded for a similar business. Furthermore, the service could be used for any type of content, including video.

However, video definitely isn’t off the plate for BitTorrent. The company is counting on its downloadable PC client to create a user base that content distributors will want to tap into. However, it may need to grow to hundreds of millions of active users to provide an attractive enough platform for anyone to concentrate on.

A final possibility is that BitTorrent is counting on some innovative new features to spruce up its offerings. Another company, PPLive, is innovating by helping to deliver Flash videos (like those on YouTube), and may be a good example of the possibilities left in P2P. However, Navin seemed to be implying that most of BitTorrent’s innovation would be in how to sell its platform.

The funding came from DCM, Accel and DAG Ventures. To date, BitTorrent has raised almost $50 million. The company is based in San Francisco