This is more of a addendum to the previous post, rather than a self-standing post. So if you didn’t read the earlier treatise on podcast advertising figures, then check that entry first.While i thought i had carefully crafted my logical fiscal analysis of the podcasting issue earlier, i realized one thing I had missed while talking to a fellow entrepreneur about the concept of file serving and storage mechanisms for consumers. The cost is not in the storage, its in the bandwidth. The bandwidth was a factor I considered from the getgo, but had always attributed storage costs to each individually delivered podcast, when in fact its a declining cost.Think of it in basic accounting terms, if you’re going to ammortize the cost of the land (the hard drive space), you can do so over the lifespan of the property (each podcast). So instead of factoring a fraction of a cent per download ($.15/GB storage on amazon S3), you are really looking at it as a declining cost. So the initial podcast serving is the most expensive one, but everyone thereafter is subsequently cheaper to deliver (note these calculations do not account for CPU cycles or stuff like that, as I’m not even sure how to measure those).So as a result of these amortizations of costs, the storage costs are spread out across each delivery, so your costs per might go from $.005 to $.003 to $.002, which may seem like a whole lotta argument over nothing, but in fact adds up (think a million times). With these renewed figures in hand, podcasting becomes a more appealing medium for a broadcaster as his/her costs are no longer fixed at a certain fee per ad (which would’ve necessitated the CPM to be high to profit).Stay tuned for more posts this week as I will be opening up more of the details on castvertising.com, and maybe giving you guys a peek behind the curtains.

So its been quite a while since i talked about podcast advertising here (mainly because I’ve been so busy, and also nothing new was being talked about in this market).Well today we’re going to look at how the numbers break down in podcast advertising (now remember, this is based on pre-launch figures). The basic premise of podcast advertising as I see it now is something similar to radio and tv ads, in which they are passive audiences that are reached by the thousands. Unlike radio and tv, where there is no way of selling your ads to an exact number of people (you have to hope the ads you bought months prior will reach as many as the network claims), podcasting offers precision download statistics, thus making a CPM (cost per thousand) model the ideal way to go.Using a CPM model we can effectively compute the revenue we generate per podcast. So for simplicity sake, lets assume a cost per thousand of $10 (which is probably at the low end of the scale). This means for every podcast downloaded, we are charging $0.01. 1 cent folks, this is a rounding error for most people, but here it isn’t about the pennies, its about the aggregate.So now that we’ve got our income, how much does it cost to host a podcast? Well if you were to use your run of the mill shared hosting, and figured for $20/month you can host 1000 podcasts (1000 x 10MB each = 10GB of traffic), then it is effectively costing you $.02 per podcast to run this show (all other costs excluded for this argument). By using the scale we’re looking to provide at castvertising.com, you effectively group the buying power and scale advantages that large scale webhosting has to offer. So with that in mind, we can effectively lower the distribution costs to a fraction of a cent. Only through use of economies of scale can the podcast advertising be both cost effective to advertisers (you don’t want them priced out of the equation), and profitable to the podcaster himself.Got any thoughts? discuss!

One of the simplest things people don’t understand about podcasting is that it isn’t free 99% of the time. The average podcaster has a number of costs he/she must incur before attempting a venture like this.

To produce a quality podcast requires a lot of time and a fair amount of capital. The podcaster needs a decent microphone and headset combo, some good audio recording software, some audio editing software (if it isn’t the same as the recording software), and a place to host said podcast. Of all these things, the software is arguably the cheapest part of this podcasting recipe, as there are plenty of free pieces of software that let you record to mp3 or wav. The hosting I believe to be the most expensive item on this list, over the course of a year.

Now you might be arguing “but hosting is so cheap now, you can get gigs of space and gigs of traffic for dollars a month,” and this is true, but everything isn’t always as cheap as it seems. The vast majority of webhosts that run the type of operation that can sell unlimited space or unlimited bandwidth for $4 a month (just using fake numbers as examples) have to cut quite a few corners to get you those prices and still pay their staff. So what initially might seem like a great deal, really isn’t great if you are running a high-profile blog. If you are running your weekly podcast and the only listeners are your immediate family, then by all means, go and use the cheapest solution possible (why pay for what you don’t really need?). Its when you are running a podcast with substantial traffic that you need to worry about costs of hosting. You’re probably thinking, why is he blabbering so much about the server cost, well it all boils down to this one point: if your server is slow, people will just give up on downloading your podcast; if people don’t download, then how are you going to make money off of it?

So in conclusion folks: pay attention to the quality of every aspect of your podcasts, as you are trying to build a reputation. It is that reputation (influenced not only by the quality of your topics) that will help you build up a quality revenue stream from your podcast.

The economics of podcasting has been a hotly contested issue over the past 10-12 month, with every side of the debate weighing in its own opinions. Despite my somewhat vested interest in the format (which I ironically have never recorded a podcast in, but thats a different article entirely), I think there is a lot of confusion out there. I am going to keep this as simple as I can (and use the most simple math and sample rates as I can think of). I am also going to try and give each side of the argument its fair shake for those of you who care.

So let’s begin with the basics: how exactly is podcasting supposed to be monetized? The first and most popular answer is definitely advertising. Advertising? In an amateur audio format? What do you mean? Well glad you asked. The general idea from what we’ve seen here and there is the insertion of 15-30 second spots at the beginning and end of a podcast. Usually this is done by the podcaster himself (if he has access to the media the sponsor wants inserted), if not then maybe the publisher handles this later (a time-waster if you ask me). Ok so now that we have inserted the ads, where do we make our money? Well that is where the big debate rages on. Proponents of podcasting think that this is enough, we’ve charged our advertisers $0.10 per podcast-listener (rough estimate, but gives us an easy number to work with of $100/cpm), and now we can divvy up the money with our podcaster and take our cut at the same time.

That sounds like a reasonable assumption, but what about the costs and other things involved in putting out a podcast? Well if you all would give me the luxury of some very simple math we will see the shortcomings of such a simplistic approach to the idea.

Using the assumption that we are charging ten cents per listener (and the podcaster is hosting his OWN data-files - I’ll touch on this a little later), here is the breakdown of how one could imagine the financials looking in a podcasting business (assume these figures are for podcasts over the course of 10 weeks - i.e. 50,000 listners a week):

• Sponsor buys 500,000 downloads = $50,000
• Publisher takes 50% cut = $25,000
• His 50% cut is eaten up by sales staff, production staff, and management
• 25% sales staff - $6,250
• 25% production - $6,250
• 25% management - $6,250
• we now have $6,250 to devote to hosting/bandwidth, and R&D not to mention profits (only an idiot builds a business without looking for profits)
• Podcaster has his 50% cut = $25,000
• His costs are as follows:
• Bandwidth: 500,000 downloads average download size of 10MB = 5TB of bandwidth. = $5,000 ($1/GB estimate)
• Production costs: $2500 (computer, microphones, software, etc.)
• Time: 5 hours($50/hour)/week x 10 - $2500 (assumption)
• So now the podcaster is left with $15k for ten weeks work (this is a HIGH assumption, and remind me if I forgot any other costs)
• This revenue breaks down to roughly $0.03 per listener for the podcaster. Now a realistic podcaster has a better number to work with as far as money they can make from the medium.

Ok, so on this front the podcaster is making some decent loot, but that is assuming he can get 50,000 listeners a week, something that I don’t believe any podcasters are getting yet. According to feedburner, in february (I know, ages ago), the average podcast they managed the feed for was only getting about 15 listeners a week. Thats why on a one to one basis, the business model isn’t there yet.
Sorry for the long diatribe, especially since i haven’t even gotten to the counter-argument, which is that podcasting lacks viable metric measurements. This I would argue isn’t that big of an issue as tv and radio are both passive non-interactive mediums for advertising, so it takes a creative marketer to make it work for them. Who says you need to know the exact number of listeners, not just downloaders? Can’t you spice up your ad to give people an incentive to follow-up later? I.e. make your promo a coupon, only LISTENERS can redeem it. Give each podcast a special coupon code and then you will track how many SALES came from the campaign. Also, lest we not forget that podcasting is a captive audience in a sense, most of the listeners are passively listening to your campaign away from their computers so instant response and performance metrics that are instantly recognizable (like in banner ads,etc.) is not going to be here for a couple of years at least.

So my recommendation to podcast advertisers is, don’t hold your breath waiting for a better medium or performance analysis system to come about, because if you do, you might just miss out on getting in while the prices are low.