Monetizing Podcasts and Videoblogs
Podcasts can "go pro" online by joining existing offline outlets or merging into new syndicates of their own. Now podcasts and videoblogs can seamlessly merge into a variety of aggregated-portal plays that were either started or eventually acquired by Yahoo!, AOL, Viacom, or the like.
These patterns repeat wherever digital distribution emerges. Several years ago, the MP3 and P2P evolution lowered the barriers to entry for independent musicians, and sites like CD Baby (which does on-demand pressing of one-off CDs) emerged, permitting musicians to exist at any scale. In many ways, the content efforts and growing pains of podcasters and videobloggers are analogous to those of unsigned artists and local bands. They release albums; they build a following; they refine their content through interaction with their audience. They find areas where they can make some money so they can keep doing what they love. And in some rare instances, they hit—get "discovered"—as the audience they’ve cultivated becomes interesting and valuable to an existing mainstream content provider or label.
Lesson #5: Advertising Is More Feasible Than Pay-Per-View or Subscription
That advertising really is the endgame of mass-distributed user-generated content is a hard-learned lesson for some. It really helps ground one to the realities of traditional media, and it’s worth reminding ourselves how all that other content is monetized.
Television and Radio: Reality Check
All "free" over-the-air broadcast television (at least in the United States) is ad-supported; even "public" television stations are getting more and more of their support from sponsors and less of it from viewers. And surprisingly, most of the revenue for basic cable is made in ad revenue as well. Only the premium stations such as HBO sustain an ad-free, subscription-only model.
Over-the-air FM and AM radio is also free and supported by advertisers or, in the case of public radio, subscribers and sponsors. True subscription-only audio is a minority—Sirius and XM satellite radio—only accounting for maybe 5–10% of the hundreds of millions of radio listeners.
Now, when you watch television or listen to the radio—free or subscription—you may naively believe that you are the customer. But you aren’t. Your eyeballs and ears are the products, and the advertiser is the customer. And agencies basically need three things from you to fund your content consumption: your gender, your age, and your zip code.
As a data point, Forrester Research estimated in 2005 that an episode of Desperate Housewives brought in $11.3 million in advertising revenues. This meant that each viewer delivered 45 cents of value to the show just by (hopefully) watching the advertisements.
One exception to advertising dominance in video is cable VOD. Ad-supported video on demand, surprisingly, doesn’t provide much income for the content; VOD provides more intangible goodwill and "stickiness" to keep viewers fond of the brand than it makes with its brief bumper spots. (Perhaps people realize that the good free VOD content is online.)
Online Advertising vs. Subscription
For the first several years of the commercial internet, many wondered whether it would be subscription or advertising models that funded content-based websites. For the most part, advertising won, with subscription models coming in a distant second. People are used to getting online information for "free," and many online businesses have failed in an attempt to ignore this expectation.
Although a number of "walled garden" subscriber-supported sites exist, the majority of websites are focused around collecting demographic information and using this to enhance their ability to sell advertising.
Podcasting follows this tradition. But there are several major differences that make podcasts and videoblogs uniquely interesting to advertisers.
Although many television shows have an associated website, the TV set is the primary destination. With podcasts, however, there is a strong web-based community relationship between the audience and the show. Many podcasts and videoblogs grew out of and maintain an association with a text-based blog, and blog software allows audience members to give feedback on each edition. This feedback loop is immediate and very accurate. No Nielsen ratings or statistical extrapolation is needed to find out fairly precisely how many downloads a show had. And this information is available in real time—as soon as a show is downloaded, these statistics can be analyzed.
There are a few blind spots: With shows that are automatically downloaded by aggregators, there is no mechanism (yet) to track whether they have been watched yet. But solutions to even this problem are being actively developed by the podcasting software authors and portable media device manufacturers.