Wizzard Software Corp. CEO Interview: Chris Spencer

• On 4:19 pm EDT, Tuesday August 25, 2009

67 WALL STREET, New York - August 25, 2009 - The Wall Street Transcript has just published its Application Software Report offering a timely review of the sector to serious investors and industry executives. This 111 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Upgrade Cycle for Application Software -- Software as a Service -- Cloud Computing -- Virtualization Software -- Government Software Sales Cycle -- Demise of Unix -- Installed Base of Microsoft Software -- Installed Base of Oracle Software

Companies include: Microsoft (MSFT); VMware (VMW); Oracle (ORCL); RedHat (RHAT); Sybase (SY); Google (GOOG); Symantec (SYMC); Avocent (AVCT); Novell (NOVL); SolarWinds (SWI);CommVault (CVLT); Data Domain (DDUP); IBM (IBM); SPSS Inc. (SPSS); Steel Vault (SVUL); StrikeForce Technologies (SFOR); Jagged Peak (JGPK); Lyris, Inc. (LYRI); Saba Software, Inc. (SABA); TTI Team Telecom International (TTIL); AMICAS, Inc. (AMCS); Sonic Solutions (SNIC); BluePhoenix Solutions Ltd (BPHX); ArcSight, Inc. (ARST); Etelo, Inc. (ETLO); Pansoft Company Limited (PSOF); Exobox Technologies Corp. (EXBX); PROS Holdings, Inc. (PRO); Proginet Corporation (PFGF); Versant (VSNT); Wyndstorm Corp. (WYND); China Digital TV Holding Co. (STV); QAD Inc. (QADI); Magic Software Enterprises, Inc. (MGIC); Wizzard Software Corp. (WZE); SXC Health Solutions Corp. (SXCI); Telvent (TLVT).

In the following brief excerpt from the 111 page report, Chris Spencer, CEO of Wizzard Software Corp., discusses the outlook for the sector and for investors.

TWST: Focusing on Wizzard Media, how would you describe the outlook for the industry in general and for your company right now?

Mr. Spencer: I think the outlook is very promising. Originally, we were focused solely on generating revenues through advertising, but now we have three ways we generate revenue, and that is what makes us have incredibly high hopes for our business. First, we charge podcast producers and creators for our podcast publishing services. We provide hosting, distribution, all different types of advertising solutions and services to them - it's all Web based. We are on track to do a little over $1 million for this year for our 11,600 publishers. Each publisher pays on average about $80 a year, and we just launched a new version of our Libsyn PRO service, which we feel will help us grow that per-publisher revenue substantially, but at the same time adding significant value for what the publisher is receiving for his annual payments. For example, if somebody wanted to have Nielsen Ratings verify the downloads for their podcast, they can have that - it will cost an extra $12 a year. If somebody wanted to receive all the unique IP addresses for everyone of their download audience, they can have that - it maybe an extra $6 a year. We have the a la carte system now, and so we feel that we are going to be offering our publishers substantially more value, and we feel that they will be willing to pay for it. We don't think it's going to be too expensive, yet it will grow our revenue for our publishing services substantially. That's the first part we generate revenues. Secondly, we provide services for podcasters to help them make money. The first way we do that is through advertising. We have partnerships with Triton Media and Ando Media; they bring advertisements to our podcasts. We also have some direct sales that we provide internally. We run them just like conventional radio or television ads. Podcasts are audio and video content. Right now we distribute podcasts to 18 million people worldwide on a monthly basis, 50 million people on an annual basis. We do over 350 million podcast downloads per quarter, and it's growing substantially. We had started last year with 13 million audience members, now we are 18 million audience members. The downloads are growing like crazy, and pretty much every major media company in the world right now is creating podcasts. We feel it's a very exciting business to be in right now. And the advertisers are starting to take note. If you visit our Web site, you can see a list of advertisers who have run campaigns with us to date. We have some of the premier advertisers in the country, like Saturn and Puma, and Panasonic and US Navy; it's a very impressive list that our ad sales team has been able to secure. A lot of our advertisers come back for multiple campaigns. We have one that's been with us for 23 months doing monthly campaigns. So they are obviously happy with the returns they are seeing from podcast advertising with Wizzard Media. We do both direct response as well as brand advertising, and it is growing. It doesn't grow overnight, and the recession definitely doesn't help when businesses cut back substantially on their advertising. But fortunately, we do continue to see growth. We went from 3.3 million ads in the second quarter of 2008 to 15.8 million ads in the second quarter of 2009. So we are definitely starting to see growth, but we have a long way to go. Our goal? We'd like to have 85% of the available inventory filed with advertising. Right now we are just breaking through 10%. So we have a long way to go, but I think over the next year, we will start getting closer to our goals of about 85% inventory fill. Finally, the third way that we generate revenue with Wizzard Media is by providing iPhone apps for our podcasters. This is new but is very exciting. Each podcaster - for example, let's use one of our favorite podcasts, Tiki Bar, which has hundreds of thousands of audience members every month watching their show, can now have their own proprietary iPhone app. App audience members receive all kinds of "show extras" along with one-click access to the show itself. They can have printable pictures, digital wallpaper, bloopers and excerpts from video they've shot - lots of exciting, increased value for the fans of their show. If a podcast has 250,000 people a month watching with approximately a 30% churn rate, that equates to about 800,000 people a year watching the show. That's a substantial audience to offer these iPhone apps. One of the most compelling points of this model is that it is all on the same platform. You listen or watch a podcast on your iPhone, your iPod or on your computer through iTunes, and you hear about this great app for $1.99 from your favorite show. Through the Apple App Store, it is literally three clicks and you have the app. We receive the payments from Apple, and we split it with the podcasters. The podcasters are very excited about this, and even though we've only been doing this for a couple of months, early signs are that this could be very profitable for the podcasters as well as for Wizzard.

TWST: What's the competitive landscape like? Who else is doing this kind of thing?

Mr. Spencer: A lot of people do podcasting, but of businesses that provide professional publishing services, there are three or four other companies out there right now. We are substantially larger than anyone else. I think the closest one to us would be about 2,000 paying podcast customers, and we are at 11,600. So we really don't have much in a way of competition at this time. There was a wave of competitors that came out and offered podcast publishing services for free. It was all free and advertising was going to be their way to offset their costs. At Wizzard, we actually did have a free offering, Switchpod. But for the most part, we continued to charge the majority of our podcasters throughout the free era. And during that time, we continued to outgrow every other company because we offer a much better service. But really, we knew that at the end of the day, advertising alone just wasn't going to support itself in the early stages of the industry. So we have now seen a lot of these free podcast publishing companies go out of business over the last couple of years - specifically over the last six months - and we have actually absorbed a several of them. There are two or three other services out there that people can choose from to pay for professional podcasting services, but we really are the dominant company at this point.

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