"The ability to find good employees might be easier, and the dollars at which those employees are hired might be lower," says Gregory Fairchild, a professor of entrepreneurship at the University of Virginia's Darden School of Business. "When there might be an oversupply of commercial real estate, one can negotiate cheaper rates for office space."

At Jaudible, Livermore has taken advantage of both conditions: an abundance of workers and lower wages. About 20 people work for him, including software developers, editors, videographers, and interns. Most are part-time and all are independent contractors. Their pay totals less than $10,000 a month.

Although the startup occupies an immaculate 1,200-square-foot office suite in suburban Southern California, Jaudible pays no rent. That's because Livermore, who co-authored two books on computer programming, bartered for the space: He provides technology consulting for a company that happens to have extra space.

A troubled economy can give lean ventures like Livermore's an additional boost, he believes, by clearing the field of bigger and more bloated competition.

The son of an accountant, Livermore refuses to take out loans and has been self-funding Jaudible's operations, which he estimates have cost $100,000 to date, through his outside consulting work.

To keep expenses down, the C.E.O. designed Jaudible's system architecture himself and hired programmers based in India to do the grunt work of coding. He equipped cubicles with slightly used laptops bought at auction from a bankrupt new-media company. When he talks to his overseas videographers, he always uses a calling card.

Before Jaudible, Livermore founded two small tech-consulting firms but was dissatisfied with their low growth potential.

As he toyed with the idea of creating a YouTube rival, he clicked through the video-sharing behemoth as well as competitors like Metacafe, Bebo, and Revver, and was bothered by their grainy quality and anything-goes mentality.

A born-again Christian, Livermore wants Jaudible to ride the reality-show wave but also be "a blessing to the world"—or at least be wholesome enough for his 8-year-old daughter to watch.

Potty humor makes the cut. In one Jaudible video, a blond woman giggles about how a toilet overflowed on her at a party.

But in another confessional-style segment, a former drug dealer who knowingly sold crystal meth to a pregnant addict exclaims that he feels terrible because his customer gave birth to a "f---ed up" baby. Jaudible's editors removed the profanity.

Unaccustomed to sanitized content, Livermore's interns lobbied to include racier clips. But the C.E.O. held his ground, telling them that family-friendly material could bring in millions more in future TV revenues. "We want the American Idol audience," he says.

To grow Jaudible, Livermore has pitched dozens of investors, many of whom he met through sheer networking chutzpah. He sneaked into a venture-capital conference in downtown Los Angeles, where he shook every hand and emerged with not only a stack of business cards but also invitations to follow up. Once the site begins to generate more traffic—right now it has just 200 videos and 3,000 unique visitors—its C.E.O. plans to call on angel investors again.

"I'm not afraid nor am I intimidated by any of the economic-downturn talk," Livermore says. "Some of the greatest movements in history happened in some of the hardest times. I believe this is the next generation of YouTube!"