Commentary

Why The Podcast Advertising Market Has Not Yet Reached Its Full Potential

The podcast industry has seen explosive growth over the last few years. Today, more than 90 million people in the U.S.— approximately 32% of the U.S. population over the age of 12 — have listened to a podcast in the past month (up from 21 million people just three years ago) reports Edison Research.

Podcasts have become an important medium to consume content, but effective monetization is a challenge. The industry has been stuck in a bygone era, due to misaligned incentives, the distributed nature of podcasts, and most importantly, a lack of standards for data and metrics.

Even with millions of listeners and hundreds of millions of ad dollars being spent every year, understanding listener behavior today is nearly impossible. Podcast publishers have no way of knowing whether people are finishing an episode, listening to specific ads or skipping over content. Even basic information about listener demographics is almost nonexistent.

As a result, listeners are stuck hearing the same mattress company, meal delivery service, or website host over and over. Major advertisers simply won’t play in a space where they can’t quantify their ad spend to the same granular level they can with other modern ad mediums. This creates major barriers for the long-term growth of the podcast medium. 

Like TV advertising in the 1950s, display ads in the 1990s and radio before Sirius XM, podcasts needs to evolve to thrive. Television, radio, and even banner ads started with inefficient methods of advertising — like product placement —because standardization didn’t yet exist for those mediums. 

Over time, advertisers demanded more data to justify larger ad spends, leading to increased advertising and measurement capabilities and exponential growth.

One of the most outdated practices in podcasting is equating downloads with active listeners. It’s similar to correlating newsletter subscribers to readers or visits to clicks. People often subscribe to newsletters, but don’t end up reading them, or they’ll visit a website but don’t click on the content. The same is true for podcasts.

Creators, publishers, and advertisers know this, but still use the metric to determine reach. Today, there is no way to reliably quantify listenership or distinguish things like automatic downloads from active downloads. Ask two different publishers for their listener data — you’ll get wildly different methods of counting, formats of data and overall listenership numbers.

Marketers used to the basic data measurement standards set by industry leaders, understand this. According to an IAB and PwC study, podcast annual ad revenue totaled only $678.7 million of spend in 2019 for the entire ecosystem, despite a huge listener base: 90 million monthly podcast listeners in the U.S. alone.

Confidence through Clarity 

What’s the solution? Standardization across all measurement, data and metrics. This will give the industry the ability to measure true engagement and allow advertisers of all budgets and goals to participate in the podcast marketplace with confidence. 

Podcasts can evolve into a mature end-to-end ecosystem, but it will take a concentrated effort. To do so, the industry should:

  • Hold data and publishing partners to a higher standard of accountability for podcast metrics and measurement
  • Measure engagement by the percentage of audio content that is completed by listeners rather than by downloads. 
  • Don’t push for or hide behind false data — it makes everyone look bad and scares advertisers away.
  • Use a third party to get verified podcast analytics before, during, and after placing ad buys. 
  • Establish consistent measurement and analytics across publishers with real-time visibility and standardize listenership reports.
  • Ensure advertising is worth the audience’s time and yields measurable effects. Everyone wins if the content is relevant and good.
  • Default to a post-cookie, no-PII world and deliver the right message with the right content. 

Measuring true attention, engagement and retention in podcasting will help ensure ad dollars are being effectively allocated and the medium grows to its full potential. If you can prove your podcast ads repeatedly drive business, that’s good news for consumers, publishers, advertisers and the entire podcast ecosystem.

 

2 comments about "Why The Podcast Advertising Market Has Not Yet Reached Its Full Potential".
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  1. Ed Papazian from Media Dynamics Inc, March 10, 2020 at 7:49 a.m.

    Jonathan, your point that advertisers held back on using radio and TV in their early years due to a lack of soundaudience  research is simply not true. In the case of TV advertisers fell all over themselves rushing to sponsor their own shows in 1950 and 1951---nationally and locally--- despite the fact that all they had were nielsen national meter panels using very tiny samples sizes to report on set uasge and American Research Bureau household diary studies for simplistic audience composition information.Local adverftisers had even worse research to guide them. I suspect that the same was true for radio in the 1930s. Advertisers weren't waiting for better research. Why? Because early radio and TV advertisers could see the positive results in sales.

    As for podcasts, sure, the audience research isn't great---but I believe that this is being used as an excuse by some agency media people to avoid taking the time to really evaluate what podcasts have to offer. Taking the same complaints you cited, nobody would be using digital video---yet many are doing exactly that---despite the shotrcomings of the data.

  2. Pierre Bouvard from Cumulus Westwood One, March 12, 2020 at 8:13 a.m.

    The last six months have seen a stampede of new measurement firms entering the podcast space. Edison Research has a person based tracking service that measures listening from actual people. Triton. the major streaming audio measurement firm has launched its podcast service. In addition, the podcast attribution space is thriving, firms like Chartable, Barometric/Claritas, Podsights, LeadsRx and Analytic Owl offer brands the ability to connect podcast ad exposure to advertiser websites and retail stores. Our study of podcast sellers and buyers find many believe things are looking up from a measurement perspective. Agencies and brands need to learn more about these new measurement solutions and try them out. https://www.westwoodone.com/2020/03/02/what-podcast-sellers-say-is-needed-to-achieve-2-billion-in-podcast-ad-revenue/

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