Fresh Air

Correction Appended: Sept. 20, 2013

It’s 10 A.M. and Dan Carlin is groaning. Stuck in bed with a bad back, he is nonetheless poring over a half-dozen thick volumes sprawled before him. Carlin, 47, is the host of the popular Internet-radio programs Hardcore History and Common Sense. In front of him lies a fraction of the research he’ll eventually use to produce his next four-or five-hour-long audio broadcast, the exact subject of which is a closely guarded secret.

Carlin’s brand of storytelling has garnered Hardcore History, the more popular of his shows, nearly a million listeners per episode. The program is filled with anything but the drowsy stuff of high school textbooks. Its topics tend toward the apocalyptic: biological warfare’s impact on humanity, murderous millennial preachers of the 16th century, the genocides of the Mongol Khans.

Carlin is one of a raft of entrepreneurs reinventing a medium long judged a money pit: Web radio, or podcasting. Some of them have broken into the mainstream. Satirist Marc Maron, for instance, has appeared on Comedy Central and is a frequent guest on Conan. Others, like The Nerdist Podcast, mine subcultures for show topics. And many are hosted by comedians seeking new outlets, including Adam Carolla and Jason and Randy Sklar, whose program Sklarbro Country is essentially sports radio with jokes.

The most successful hosts are even giving traditional media a run for their money. Carlin’s most recent history broadcast, for example, was downloaded more than 40,000 times by fans within the first hour of its release. Considering that some prime-time networks draw in a few hundred thousand viewers a night, it’s not hard to see why the medium is getting another look.

A Second Coming

Though online radio shows and podcasts have been around for more than a decade, established media businesses have mostly given up on profiting from them in recent years. What’s different about shows like Carlin’s? As advertisers shift their spending onto the Internet, some are now seeking out personalities with loyal followings to vouch for them. Part of the appeal is that rather than inserting typical audio ads, the new radio pitchmen tend to endorse products and services directly or read sponsored messages during the show–a practice reaching back to the golden age of radio.

As a result, NextMarket Insights analyst Michael Wolf estimates that the most popular podcasts are bringing in from $20 to $80 per 1,000 listeners. That makes them one of the most lucrative advertising formats on the Internet. By comparison, typical banner ads generate a mere $2.66 per 1,000 views on average, according to analysis by Forrester Research. For a weekly program with a million listeners, that could mean revenue of up to $4 million a year.

Because Carlin releases his show much less frequently, it doesn’t command the highest rates. A majority of his income is generated by listener donations. (Carlin declined to give specific figures.) Other popular podcasters, including Maron and Joe Rogan of The Joe Rogan Experience, produce shows as often as twice a week. Niche technology and business podcasts are especially lucrative. John Lee Dumas, host of interview show Entrepreneur on Fire, says he pulls in ad revenue of $240,000 per year plus an additional $150,000 with a listener membership program. “Sponsors are willing to pay me so much because every single person listening to me is their target audience,” Dumas explains.

The medium itself is also growing. According to Edison Research, the percentage of Americans who are listening to Internet-based talk radio has nearly tripled since 2006. Some 17% of Americans now regularly download at least one show per month to their smartphones and computers. The majority are in the coveted, Web-savvy 12-to-34-year-old demographic.

Carlin is a former television reporter for KABC in Los Angeles, where he grew up. He made the switch to talk radio in the 1990s, hosting a political radio broadcast that eventually became the template for his current-affairs-themed Common Sense. But Carlin’s often unorthodox political views–he regularly skewers both major political parties in Washington–never quite jibed with corporate radio’s obsession with discovering the next Rush Limbaugh. “I remember one consultant telling me that the audience needs to know where you stand on every issue within three minutes of turning you on, and I would ask, ‘What normal person is able to distill their beliefs in three minutes?'” recalls Carlin. He broke out on his own using proceeds from a previous Internet venture as startup capital. First came Common Sense in 2004, followed by Hardcore History in 2006.

Carlin begins each day by going through his hometown paper, the Eugene (Ore.) Register-Guard, clipping articles that might provide fodder for his political show, the format of which is similar to your average AM talkfest. He reads news sources ranging from the Huffington Post to al-Jazeera and scours feedback sent by his fans over e-mail and on Twitter. By mid-morning, he turns toward research for the history show. While a typical Common Sense broadcast averages an hour and is produced roughly every two weeks, Hardcore History shows last much longer and require Carlin to draw from 30 to 40 books. He records in a sound booth he built in his garage for about $3,000, and his shows are edited by his one full-time employee using Apple’s Logic Pro recording software.

Show Them the Money

The surge in profitable programs wouldn’t be possible without interest from advertisers. Some of the biggest sponsors include Web-hosting company Squarespace, Internet-services provider Tucows and Audible, the audiobook subscription service owned by Amazon. Michael Goldstein, the head of marketing for Tucows, says podcasts are appealing because ads that appear on them work. That may be because hosts work the advertising messages into their programs. On a recent Joe Rogan show, the host launched into a diatribe about waiting in line for stamps at the post office. His program is sponsored by Stamps.com a company that sells postage online.

The companies that have been most eager to advertise on the medium so far are technology firms. Anthony Casalena, founder and CEO of Squarespace, sees podcasts as a natural showcase for his company’s services. Another strength: the authenticity of the host. “A podcast is only going to be successful if the host has a strong connection with his audience,” says Casalena. Goldstein echoes the sentiment: “You never get somebody grateful to the Ford Motor Co. for sponsoring Two and a Half Men.”

Would-be podcast jockeys face plenty of potential pitfalls. For one thing, most of the profit in the industry goes to a small number of the top stars. Rob Walch, a vice president at Libsyn, the largest podcast-hosting service, says just 10% of his firm’s broadcasters reach the popularity threshold necessary to warrant soliciting advertising. Fewer still attract the number of listeners that would enable them to make a living from podcasting alone. What’s more, because most listeners download shows through Apple’s iTunes store, hosts are unusually dependent on good reviews and word-of-mouth traffic from anonymous listeners.

And then there are the growing pains. Carlin, for one, is concerned that success might dilute the relationship he has cultivated over the years with his current audience. “I do get worried that if we ever appear to be this juggernaut, that my audience will think I don’t need their money,” he says. That would jeopardize his business. He also worries about cluttering his programs with advertisements and scaring away listeners who generously donate to the endeavor. After all, they are paying to hear about the bloodiest battles in history, he says, not product pitches. In other words, appearances matter. Says Carlin: “I don’t worry about getting too big as much as seeming too big.”

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Due to a transcription error, the original version of this article stated that Entrepreneur on Fire produced yearly ad revenues of $2.4 million and $1.5 million in listener membership revenues. The broadcast’s ad and membership revenues are actually $240,000 and $150,000, respectively.