Jake Fischer (16) of Minnesota and Weina Scott (17) of Florida started podcast hosting company Switchpod in 2005. Switchpod’s business model is similar to that of other podcast hosting companies: unlimited bandwidth, low-cost plans, iTunes compatibility. But when Jake Fischer started his own podcast, he found that, as a high schooler, he simply couldn’t afford to use any of the other services out there. He and Weina have given Switchpod a free hosting plan that supports itself by adding image or audio ads to a podcast’s feed.

Wizzard Software licenses speech-to-text and speech recognition software. When Chris Spencer started getting requests by podcasters to use Wizzard’s electronic voices to create “podcasts” of their content, he was intrigued. “I said, ‘what the heck is a podcast?’”

The speech technology market was simply not growing fast enough. And by entering a related market, Wizzard risked competing with its own customers. Requests from bloggers just didn’t stop coming. So after a little research into podcasting and finding that it fit with Wizzard’s core business, Chris decided to dive into the budding industry head-first. After calling around to podcast companies, he and Wizzard began negotiating with Switchpod as a possible acquisition.

He knew Jake (left) and Weina were in school, but Spencer assumed that meant college. “I had already been talking to [Jake] for several weeks, knowing that he was young, but assuming that he was 21 or 22.” And after Spencer asked if the two young entrepreneurs wouldn’t mind taking a semester off to work on the business full time, Jake replied ‘my parents really want me to finish high school.’ “High school!” said a surprised Spencer, “How old are you?”

“There was a long pause on the phone,” recalls Fischer. “[Chris] seemed very surprised, but he was very supportive because he also started his first business at 17.”

Switchpod started like an online businesses in a fairytale. Fischer initially paid for the business out of his own pocket, with Weina programming everything. Then, after persistently emailing potential sponsors, they started getting advertisers and putting the money back into the company. Soon thereafter, Wizzard Software came along and bought the company for $200,000 of its stock. But it’s not the millions that make headlines, as both Jake and Weina already have college paid for, and they haven’t even settled on what school they’re going to yet. Weina wants to go to Yale, and Jake may go to a state or local college, or just go to work for Wizzard. In essence, both have plenty of time.

Even if you decide to cheat your subscribers out of a quality audio or video experience by using the absolute dirt cheapest equipment available, you also have to put in time and effort recording, editing, coming up with content and marketing your show. Even if a podcast episode is not released as regularly as every Thursday, a podcaster must produce shows on a regular basis to keep their subscribers happy. And without a revenue model, much of that time may be better spent actually earning a living.

A lot of podcasters can’t hack it and fall prey to a phenomenon called “podfading,” coined by podcaster Scott Fletcher in 2005 after he abandoned two of his own podcasts. According to a Wired article published earlier this year, Rob Walch of the Podcast 411 estimates that 1/5 of all podcasts never make it past the 10th episode.

In an ideal world, a podcaster will be able to sustain themselves by getting lots of enthusiastic subscribers and making a little bit of money selling ads and sponsorships on their show. The more revenue that’s generated by the podcast, the more money the podcaster can sink into better equipment, and the more creativity they’re encouraged to exercise. The subsequently higher production quality of each episode, and the more effort and money that can be put into marketing the show will in turn draw more subscribers. More subscribers means more valuable advertising and so on.

Like TV and radio before it, as companies try to flesh out the best method of monetizing podcasts and draw closer to the podcasting ideal, we should start to see more and more high-quality shows with larger audiences. Podcasters are playing with their new medium.

And like the early days of broadcast advertising, we are seeing podcasts experiment with sponsorship messages, on-air reads, product placements, and shorter versions of the 30 second spot. They’re deciding whether an ad should play in the beginning of an episode, after the intro, in the middle, or at the end. Podcasting has also taken its toll on the monetization of traditional media. Alex Laats of podcast search company PodZinger makes no distinction when it comes to “old” media or “new” media. “The line between what is a podcast and what is not a podcast will blur over time,” he says, because “it’s just audio and video.”

Luckily there is no shortage of companies trying to help podcasters take advantage of this new medium. Companies like Fruitcast, Kiptronic, RadioTail, and Podtrac are all slightly different, but all of them attempt to insert advertising into the body of a podcast. Where broadcasted shows are typically one-shot deals unless they go into syndication, podcast episodes stick around for as long as their media files are hosted, cached, archived, etc. This also gives different opportunities for revenue generation that aren’t possible for broadcast. PodZinger just launched its podcast search advertising network last week, which places banners next to search results and inserts 15 second pre-roll videos in a corresponding Flash-based player.

Podcasting also depends on subscribers—literally the undersigned—who explicitly opt-in to a show. While it eliminates infomercials and other forms of advertising that prey on passive users, it also makes podcast advertising similar in some respects to print magazine advertising. There are no up-fronts, because there are no podcasting seasons, and no “sweeps” weeks. And even if a podcast contains advertising that can change dynamically each time it’s downloaded, once it’s on your hard drive, the ad is set. Every time you play it, it will contain the same advertising content. And if you decide to pass it around to your friends (depending on what the podcast’s copyright license allows for), they will see or hear that same fixed advertising as well.

But just like broadcasting finally settled on the 30 second spot as the standard form of advertising in most cases, the podcast advertising scene will also eventually stabilize, revealing one or two standard methods for generating revenue. Even the volatile world of online banners seems to have settled on Google-like contextual advertising as the most effective type. There will always be new technology to build on what podcasting already has, but its feet will settled firmly on some method that becomes tried and true.

The service works with most types of servers, but until recently, those on Akamai’s EdgePlatform could only use the service in a stripped-down form. Now, the two companies have figured out how to combine Kiptronic’s ad platform with Akamai’s content caching system, which the company hopes will allow Akamai customers to use the Kiptronic ad system without impediment.

“By bringing the two together we’re we can offer the same level of advertising experience, and at the same time offer all Akamai’s benefits,” says CEO Jonathan Cobb. The partnership opens up podcast monetization services through Kiptronic to companies like American Express, AOL, Google, Apple, Yahoo, and Xeox, all of which use the Akamai platform.

Podcasts are inherently targeted since they usually reach niche consumers. And with the Akamai system’s 20,000 servers caching podcasted content, distribution downtime is virtually eliminated, and the peaks and valleys that naturally go with a podcast’s distribution pattern are largely mitigated.

The Podbridge system offers audience metrics like the number of actual “plays” and user opt-in demographics. Advertisers can control the insertion of ads within specific content and achieve precise targeting.

“Popular Forbes.com shows such as StreetTalk and SportsMoney will now meet the increasing consumer demand for convenience, while advertisers will be able to effectively reach and engage with a tremendously valuable audience,” said Podbridge CEO and Founder Murgesh Navar in a statement.

“Up until now, the big hurdle for advertisers has been the inability to gauge if someone had viewed any or all of the video content that they have downloaded,” added Mike Smith, VP and General Manager of Forbes.com. “With Podbridge, not only can we measure actual viewing, but we also get a detailed breakdown by audience demographics and are able to precisely target advertisements.”

According to a Nielsen/NetRatings study, over 5.5 million Web users downloaded a video podcast during a thirty day period within June and July 2006. Podbridge-supported podcasts on Forbes.com will be launched over the next few months.

-”You have to have an iPod to listen to podcasts, right?”
-”Nobody’s creating any good material in podcasts.”
-”I can’t commit to it because the ROI is too difficult to figure out. You can’t tell who’s downloading for accurate metrics.”

Okay, let’s cut to the chase and get on the same page.

65% of people listen to podcasts on their computers versus an iPod or other MP3 player according to recent research from Knowledge Storm. Podcasts are comprised of MP3 files which can be listened to via computer, MP3 player, or burned to a CD to listen to in your car or CD player.

There is an enormous amount of excellent material produced by NPR, IBM, GE, and myriad other businesses, indies, musicians, and private citizens. The wealth of material is also growing at an enormous rate-pundits suggest that by 2010 there will be anywhere from 20 to 80 million podcasts available online.

In terms of downloading metrics, you have a point–but to a point. Here’s one thing people forget about ratings for TV and radio: they’re based on surveys based on the behavior of the test groups of people being monitored about what they watch/listen to. It’s not like there are microchips embedded in their skulls/digits that record every bit of media they ingest.

For podcasts, metrics are improving to the point where you can tell where someone has downloaded a show, whether they’ve streamed your show (listened to it online versus downloaded), and even some basic demographics. (Age, gender, etc.) But unless you either embed an MP3 file with an encrypted format that allows a user to monitor how much of a podcast you’ve listened to, the only way to tell whether someone has listened to a podcast is to stalk them, plain and simple—which gets expensive.

That said, I’m not here to admonish or instruct you on how to make money on creating a podcast for its own sake. Meaning, I’ll be the first person to tell you you’re not going to make money with a podcast simply by charging people to dowload your show–unless you’re Ricky Gervais, Jon Stewart or perhaps a truly fine Elvis impersonator. There are some well known speakers who do charge a pretty penny for their podcasts (versus giving a live seminar, for instance) but I want to focus here on the corporate marketplace.

“The explosion of online video, fueled by the growing adoption of broadband technologies in the home and office, and offerings from media outlets such as MTV, VH1 and ABC, has heightened the need for an effective, user-friendly search engine to help users find their favorite topic,” said PodZinger president Alex Laats in a statement. He adds, “…full text search enables a viable advertising business model for video creators and advertisers looking to monetize their content. We expect to see strong growth in advertising tied to video in the upcoming months as advertisers understand the access they now have thanks to PodZinger.”

Just as with audio podcasts, video podcasts (AKA vodcasts) span the entire spectrum of human interest from humor and entertainment to sports and news. Humor news show Rocketboom, which just ran their first ads earlier this month, claims more than 200,000 viewers per day.