Oddcast, makers of the avatar product Sitepal, closed a $4 million funding round last week led by Union Square Ventures. The company creates Flash-based characters for websites: for a subscription fee, you can assemble a customized avatar that talks using text-to-speech or a recording of your own voice. These are sometimes used by online stores to give a "human" touch, but this implementation is highly irritating (see this example).
However, the company is now branching out in a new direction - offering their Sitepal product to bloggers and MySpace users (you can see a MySpace demo here). This demographic craves personalization, so it's a great strategy. Nonetheless, they're continuing to charge for the service - this creates a huge barrier to adoption. A free version will be absolutely essential if they're going to ride the MySpace wave. What's more, they need to roll out the MySpace product on a separate site - it doesn't sit well among the corporate offerings.
While Sitepal characters can be annoying in the wrong setting, they'd make a great addition to social networking profiles - the release of a free version could drive rapid adoption. Further down the line, a mobile version seems inevitable.
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