Searching For The Pod Of Gold

As podcasting's popularity grows, companies are seeing dollar signs

The buzz that built up around podcasting after its debut a year ago wasn't about money. The technology, which makes it easy for people to create their own audio recordings and post them on the Web, sparked imaginations because it allowed anyone to create a radio show about pretty much anything, from German board games to vegan cooking. Podcasting was innovation for outsiders. And to the early purists, talk of profits was nothing less than heresy.

Not anymore. Today, upstarts, venture capitalists, and media giants are all hard at work trying to figure out how to make podcasting pay. They're experimenting with advertisements, subscriptions, even with having on-air personalities talk up certain products, like in the early days of radio. The latest sign of commercialization? This month, pioneer Adam Curry is launching a podcast network, with 30 to 50 shows that will split ad revenues. The concept won Curry a $9.8 million investment from Kleiner Perkins Caufield & Byers and Sequoia Capital, two top venture firms in Silicon Valley. "We saw the amazing adoption across the Net, and it was obvious that there was a big opportunity," says Mark Kvamme, a partner at Sequoia.

Mavericks such as Curry don't have podcasting all to themselves anymore. Traditional media companies, including CBS (VIA ), Clear Channel Communications (CCU ), and Walt Disney (DIS ), are lining up their podcasts right next to those from indies. Tech giants America Online, (TWX ) Apple Computer (AAPL ), and Yahoo! (YHOO ) are rushing in with aggregation services that collect thousands of podcasts in one place, laying the foundation for selling shows and ads. iTunes offers 15,000 podcasts, and listeners have signed up for 7 million subscriptions.

Some models are emerging. Many podcasters are turning to sponsorships, which typically involve a 15- or 30-second audio ad at the beginning of the podcast. The popular podcasts usually set flat rates ranging from a few thousand dollars a month to as much as $45,000. In February, Volvo (VOLVY ) agreed to pay $60,000 for a six-month sponsorship of the monthly podcast of Weblog Inc.'s Autoblog, as well as advertising on the site itself. Over that period, the show was downloaded 150,000 times.

Because the number of listeners is changing fast, a flat-rate sponsorship can end up being a bargain or a bust. KCRW, the public radio station in Santa Monica, cut a deal with Southern California Lexus Dealers for a sponsorship this summer, when the station was getting 20,000 downloads a week. Since then the number spiked to 100,000. When the Lexus deal ends, KCRW plans to charge $25 per thousand listeners. "Once we get out of this sweetheart deal, our goal is to cast our net as wide as possible," says Jacki K. Weber, KCRW's development director.

The rates podcasters are getting are attracting attention. Although there aren't reliable figures for the whole field, the $25 per thousand listeners that KCRW plans to charge seems to be about average for popular podcasts. That's pretty lofty, considering a New York City morning radio show charges between $12 and $15.

Why the premium for some podcasts? They help advertisers reach specific groups, even as media fragments. "You have to think of this more as investing in a valuable customer," says Mary Kang, associate media director at StarLink, a Chicago ad agency. That's one reason Sequoia's Kvamme thinks podcasting could siphon $1 billion to $2 billion away from the $30 billion radio advertising market in three to five years.

Podcasters are experimenting with ways of pulling in money without advertising. This Week In Tech, an indie podcast with over 200,000 listeners, asks for $2 donations per month and rakes in around $10,000 a month. Others think listeners will pay a monthly subscription fee for content or perhaps a one-time download charge.

Curry is pushing the limits for indies. His troupe of podcasters plans to offer advertisers a host of possibilities, including spots where a podcaster tries out a product and podcasts devoted entirely to a product or service. Gretchen Vogelzang and Paige Heninger, the Virginia women behind the show Mommycast in Curry's network, will promote a new toy from Hasbro Inc. (HAS ), iDog, on each episode.

Still, for all the energy some podcasters are pouring into making money, they will be dwarfed by the thousands who aren't pursuing riches. For them, the original allure of podcasting remains: creating their own show, even if only for a few close friends.

By Heather Green

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