• by Gavin O'Malley  @mp_gavin, February 26, 2007

Advertising on podcasts, dubbed "podvertising," will remain a niche channel through 2011--albeit a $400 million niche. That's according to new research from eMarketer, which predicts a fivefold podvertising spending increase from $80 million last year to $400 million by 2011.

The growth projection is even more dramatic if compared to the mere $3.1 million that marketers spent on podcast ads in 2005.

Still, the fact that most widely consumed podcasts still have audiences numbering below 50,000--and most have far fewer--will secure the format's niche status for years to come.

"Despite an incessant buzz about the medium, regular podcast users are still rare," explains James Belcher, eMarketer senior analyst, in a new report, "Podcast Advertising." "As such, podcasting is a niche marketing channel; it may be the right niche for some marketers, but it's still a niche.

"The fact that podcasts are supplemental ad channels for most marketers is not for lack of choice, however," says Belcher. "Downloadable serialized short-content format is increasingly available, and iPod sales are seemingly unstoppable."

Forward-looking agencies now push clients to set aside about 5% of their marketing budgets for immature media like podvertising--a percentage not expected to rise dramatically through 2011, according to Chad Stoller, executive director of emerging platforms at Omnicom Group's Organic.

"I definitely see growth in podcasts because they're free and targeted," said Stoller. "But it's still going to get lumped into that experimental media category until measurement improves and audiences grow."

The number of marketers including podcasts in the mix grew last year.

Publicis Groupe's Arc Worldwide developed what it calls a "consumer-experience planning team," and created Purina-branded entertainment and informational packages for iPods and phones.

Dimension Entertainment created a podcasting channel for its comedy "Scary Movie 4." Also, National Public Radio reported revenues from new-media operations--including podcasts--equaling 10% of total revenues. Acura is one of NPR's main podvertisers.

According to podcast search engine PodNova, consumers can presently choose from roughly 90,000 podcasts online. But, explains eMarketer's Belcher, podvertising's strengths will continue to be overshadowed by its barriers to entry.

"Podcast sponsorship uses the medium's strengths: self-selected subscribers, host endorsements and low-waste ad impressions," says Belcher. "Yet the time and effort required to develop an effective sponsorship will keep podcasting from cannibalizing ad dollars in other channels anytime soon."

Currently, only a minority of U.S. Internet users listen to podcasts, but according to the "Podcast Downloading" report from the Pew Internet & American Life Project, roughly 12% of Internet users say they have downloaded a podcast to listen to or view at a later time. That number compares to 7% of Internet users who reported downloading a podcast in Pew's February-April 2006 survey.

"The bad news is that in surveys only 1% of respondents reported downloading a podcast on a typical day," says Mr. Belcher. "In other words, the frequency level remains very low."