Podcasts today come in every shape and size, with a message for just what you are looking for. Did you ever wonder how those incredibly informative podcasts come your way for free? Of course you have- advertising. Free is good for podcast listeners, but what about those on the production side of the business?
You only have to ask yourself one question. Do you ever listen to those ads before the show, or are you like me, and skip them entirely? I can’t recall that I have ever purchased a product based upon a podcast ad.
So, if you are like me, the industry may have a serious problem with this business model. Somewhat analogous to an Amazon seller who has all his eggs in the Amazon basket, the podcast producer is entirely dependent upon advertising revenue. After all, you aren’t going to pay for it
According to Apple at WWDC 2018, there are more than 700,000 active podcasts and more than 29 million podcast episodes. These type of numbers bode well for podcasts. Data from the Interactive Advertising Bureau and PricewaterhouseCoopers LLP suggests that U.S. ad revenue from podcasts is expected to more than double from the $478 million spent in 2018 to $1 billion in 2021. The future of podcast revenue will ultimately be determined by the viewer audience. In an era where technology is doubling every 18 months, podcasts are susceptible to extinction. Remember the newspaper?
Is it possible to have growth in the podcast industry and still worry about future revenues? The disparity is that the podcast business is posting a healthy 18% compound annual growth rate for weekly listeners. The troubling news is that rate is far below the 45% growth rate in podcast advertising revenue.
Profitable business models appear to be those charging some type of monthly fee. Sirius XM has had a 4.5% compound annual subscriber growth over the past several years, and is within shouting distance of Netflix’s 20.7% and Spotify’s 22%. Podcasts being free have no subscriber base. Troubling to advertisers.
Another dilemma is the fact that while content is increasing in the form of podcasts, the number of listening hours cannot keep pace. According to Dan Granger, chief executive of advertising agency Oxford Road, “The demand from advertisers is going to eclipse the growth rate of the expansion of new audiences.”
If content is king, one wonders why the larger players don’t begin to acquire the major podcasters. Podcasting may become more like Netflix Inc. or Amazon.com Inc.’s Prime, or perhaps the large media companies will simply gobble up all the great podcasts and make them part of their broader offering.
The trick is to find the equilibrium that will appeal to both listeners and advertisers. Podcasts are generally in niche areas that have devoted listeners, making target marketing much easier. Because podcasters generally have this targeted audience, tracking advertising through podcast promotions is actually easier than advertising through broader retail channels.
When push comes to shove, it will ultimately be about the percentage of a podcast that becomes advertising. If you’re like me, at some point, usually sooner than later, you will tune out the ad as well as the podcast.