The Future of Podcast Advertising
Four industry experts weigh in on why an ad-supported model still matters to the podcast industry.
A few weeks ago, Luminary declared “podcasts should be ad-free,” and that statement started a thoughtful conversation among our members and our contributors about ad-models and their significance to the podcast industry at this moment. As editors, we wanted a clearer picture of the stakes from the people who make, buy, and sell ads every day — is the ad-model we have working? We invited four industry experts — a host and creator, a network executive, and two marketing executives— to weigh in.
What follows is a lightly edited version of that conversation.
Participants
- Matt Gehring, Vice President of Growth, Rothy’s
- Hernan Lopez, Founder, Wondery
- Krystina Rubino, Head of Offline, Right Side Up
- Helen Zaltzman, Host, The Allusionist
- Moderator: Ashley Lusk, co-editor, The Bello Collective
Our original reason for exploring this topic began with a tweet from Luminary, which exclaimed that all podcasts should be ad-free (the tweet has since been deleted). But let’s be clear — ad-free does not usually mean completely free. In Luminary’s case, it means subscription-based. Is there room in this market for both models?
Hernan Lopez: 100 percent, yes. From television to newspapers and magazines, streaming music and live radio, every kind of media sooner or later has developed a consumer-supported model in addition to an advertiser-supported model. Why should podcasts be an exception?
Krystina Rubino: Could not agree more with Hernan, and so well put. We forget that podcasting is a medium like any other; it is a unique channel, with unique means of distribution, but there are peculiarities to all media. And in every medium or platform, from radio to YouTube to Twitch, different revenue streams have been developed for creators, producers, networks, etc. There is room for a Netflix of podcasts, though I really wish people would stop using that analogy.
Helen Zaltzman: This market already contains multiple models — e.g. ad support, listener support, paywalls. One of my shows uses all three of those at the same time! I see no reason to rule out any particular financial model. In fact, I’d be cautious of depending on just one. (That might be more to do with my constant fears that my livelihood is about to collapse more than it is about the viability of podcast finance, though.)
Matt Gehring: I do not see the market moving toward one model. If a brand (or individual) can drive enough demand through a single payer model, they will do that. We will also see collections of podcasters form for a subscription. It is probably similar to what we see happening within the TV landscape. My question for creators is: will this be what drives the most revenue or something else?
What is the benefit of an ad-model (vs. subscription/Patreon model) to makers? To brands? To networks?
Hernan Lopez: As a network, we want our listeners to tell their friends about Business Wars or Over My Dead Body, knowing that their friends will be easily able to find those shows, and in turn recommend them to other friends — that’s why we like the ad-supported model, which keeps podcasts widely-available to all.
Krystina Rubino: Podcasts offer a unique vehicle for brands to motivate often hard-to-reach potential customers. Podcast consumers represent an audience base that skew younger, tend to be early adopters of technology, and are willing to connect directly with brands who make products they want to consume. That’s why nascent, direct to consumer (DTC) e-commerce companies do so well in the channel. The trust a listener has for a show extends to the product or brand advertised; listeners, by nature, trust their host’s recommendations. That helps new brands jump over a challenging credibility hurdle in the consideration process. For established brands, you’ll get high recall and lift in awareness, in addition to direct sales. It’s a helpful channel to supplement more reach-based mediums, like television.
Matt Gehring: Krystina is spot on about the trust element, and as Hernan said, the ad model allows everyone to access the content. Obviously as a brand I like the ability to target specific podcasts, which buying into a subscription model would likely not allow me to do. And ultimately, I obviously benefit from a model that allows me to advertise in a format where the ad is read in the voice of the host.
Helen Zaltzman: Ads represent a larger proportion of my shows’ income. The benefit to me as a maker is that because many of the sponsorship deals are done in advance, I have a better idea of what my production budget might be a few months down the line. The most important thing to me about the ad model, though, is that my show can afford to exist and listeners can hear it for free. I love being able to provide content that’s free.
There is a common perception that a host-read ad or endorsement is the most valuable podcast ad-type of them all, because it feels like both a personal and custom experience to the show. This format might also directionally point to why people have 4.4x better brand recall of podcast ads than other digital ads (Midroll). Do you have any fears about the efficacy of podcast ads diminishing as the market moves to make ads faster, easier, and cheaper to produce?
Hernan Lopez: I do believe there’s a risk if the industry were to move towards radio-style, pre-produced, “who-can-shout-louder” ads. We don’t accept those kinds of ads [on the Wondery network], and I think that’s true for most large podcast publishers as well as individual podcasters.
Krystina Rubino: A mid-roll, host-read, embedded ad is the most effective spot in the medium for driving purchase consideration and activity for advertisers measuring a direct or indirect response. There are natural limits to the scale advertisers can achieve with those spots, but it doesn’t diminish their effectiveness.
There are more and more companies using dynamic ad-serving technology to serve up unique, seamless listener experiences, but I fear programmatic technology coming for this medium before it’s ready. IAB 2.0 compliance helps, but we’re still not at industry-wide compliance. The sloppy application of that technology to the medium may result in brands receiving a false negative response from the channel, like how digital display banners were ubiquitous, became less effective over time, then became the scourge of the medium. Let’s not do that again here. [Editor’s Note: Yes, please, let’s not.]
Helen Zaltzman: Here’s my fear: as more brands enter podcasting because they heard it’s A Thing, but maybe aren’t listeners themselves, and don’t really get how the thing works best, they might not want my style of messing around, so it’ll be curtains for me. But at least you’ll have 22 songs about Squarespace to remember me by.
Matt Gehring: As a brand, I would hate to see everything move to produced spots. Having done a lot of advertising in the endorsed radio space the past decade or so, I know the value of a host-read spot — especially for lesser known brands. But for podcasts, since nothing is completely a live read like radio, it might not matter as much. I hope the movement to programmatic advertising does not happen — I think there are other more important elements to develop, like tracking actual spots heard and response rates in real time.
Besides better brand recall, why should brands include podcasts in their advertising strategy and media buys?
Hernan Lopez: (1) The emotional power of sound (2) Engagement (3) One-third of Americans 12+ listen to podcasts every month — that’s a critical mass advertisers can’t ignore, especially because many podcast listeners watch ad-free TV or use ad-blockers and thus are hard to reach with other kinds of ads.
Helen Zaltzman: [Because] I’m going to talk about your product in a very fun way, right into the listener’s ear.
Krystina Rubino: And it’s probably going to sell a bunch of websites, mattresses, snacks, toothbrushes, razors, etc. Most of the advertisers we work with measure a direct response, and the channel is rife with performance marketers. Listeners have chosen to spend their time listening to Helen’s shenanigans, and that doesn’t stop at the ad break. That’s why I kind of love that the best hosts in the space are selective about what they endorse. It can be frustrating when the products you’re working on are rejected for varying reasons, sometimes just because the host can’t quite put their finger on it, but they don’t think it’ll work. But that’s what helps make it work, and you have to respect their integrity.
Matt Gehring: Podcasts allow you to: 1) get your message in front of an actively engaged user, and 2) get validity from a host-read spot. That validation is very important for new brands. I am not sure it is as necessary as you get aided awareness of a brand above, say, 30%, but that trust element is big.
[Editor Note: “Aided awareness” is when a consumer can express knowledge of a brand or product when prompted.]
For hosts and networks, what do you look for when deciding to work with a brand or a buyer? What is important to that partnership?
Helen Zaltzman: I prefer it to be a product that will be interesting in some way to the listeners — something they can use. If it’s a product that is a small business, or trying to do some good, even better. And the brand needs to be cool with me writing the ad myself. That works better for them and for the listeners.
For brands and agencies, what are you looking for when deciding where to advertise? Content? Audience size? Ad format?
Krystina Rubino: This is one of the areas where it’s easy for new advertisers in the channel to make mistakes at the outset. Partner and show selection can be difficult compared to other channels that have third parties, like comScore or MRI, monitoring media properties in the space and reporting on their demographics, audience size, etc. All of the criteria you mention are valid [content, audience size, ad format], plus others like the length of time that current advertisers have been on a show and/or their rate of renewals, whether or not brands with a comparable target demographic have been on that show before, etc. There are also creative criteria, like the content, quality, and delivery of a host’s ad read. And then there are selection criteria that depend on the brand itself and the kind of campaign you’re launching, i.e. branding or direct response.
Matt Gehring: Content is important for most brands — especially for ones that are concerned about content and language. I have had to pull ads from places that performed well but were in conflict with the brand positioning or where negative customer feedback was strong. Audience size is less of a concern for me given how we typically measure response. In choosing where, the way that audience matches my existing customers or those I want to target is important; but that can be tough for a lot of podcasts to get a good read on.
Krystina Rubino: Totally. It’ll be near impossible to do demographic-based audience planning at scale until a partner like Nielsen, GfK MRI, comScore, etc. figures it out across shows with statistical significance. Audience surveys conducted by networks can be helpful directionally, but they shouldn’t be used as the primary basis for planning at present. We otherwise risk making assumptions about a show’s audience that may not be true, and there are times when shows aren’t a no-brainer demographic fit but could work well — like how male skewing comedy was a runaway success for ZipRecruiter. Look at the list of advertisers who run on Joe Rogan: he crushes reads for toothbrushes, meditation apps, video conferencing software, and stamps.
Attribution in podcast advertising is still a real problem. Unless your brand has a promo code or a unique URL built into the ad experience, it can be difficult to determine how much traffic was generated from an ad experience. As podcast hosts, networks, and brands, how are you determining success?
Hernan Lopez: In addition to the traditional methods of custom URLs or promo codes, we have developed a proprietary attribution system that can determine which of our listeners went on to visit our participating clients’ websites. And for branding or tune-in clients, we can measure brand lift through studies conducted by Nielsen and Metrixlab.
Helen Zaltzman: TV ads, radio ads, print ads, side-of-bus ads don’t need to prove that they’re generating traffic to a brand, so why do we?
Krystina Rubino: Podcasts behave more like an offline channel in terms of demand generation, vs. a digital tactic like paid search that helps capture demand. I understand your sentiment, Helen, but many of those channels are actually run on a direct response basis. Marketers rightfully demand accountability from media buys, and you’re not always competing with the share of ad dollars that go towards reach mediums. We’re also helping advertisers who are used to the metrics they get from digital advertising diversify their marketing mix. Podcasts are a fantastic foray into offline advertising for brands who may not be able to run radio or TV yet but want to test into new channels to generate demand for their brand. Many of the advertisers who look to podcasts have already scaled platforms like Facebook and Google to diminishing returns.
Matt Gehring: Codes and a unique offers work the best, but a lot of brands do not run offers. Vanity URLs are not ideal unless a listener is using it to claim a unique offer only available via the vanity URL versus the main site. Using a post-purchase survey is the best way to gauge performance and then look at building a multiplier based on that response coordinated with any code usage (if you have one).
Krystina Rubino: Totally agree, direct attribution via code or vanity URL combined with a post-purchase survey to measure indirect response is the most viable measurement option at present.
Remember when Hulu invited you to pick your own ad experience? Or how Spotify invites you to watch a video ad in exchange for a longer ad-free listen? Imagine there is a great, big, bold future for podcast advertising — and it’s interactive! What would the ideal experience look like between hosts and listeners? Between brands and listeners?
Hernan Lopez: I’m more inclined to baby steps — give listeners the simple choice between paying for an ad-free experience (like we do with Wondery+, or Stitcher does with Stitcher Premium), or enjoying the shows for free, but with a standard ad load. I think anything in between would require the industry to do individual-level targeting, which I don’t think the industry is quite ready for.
Helen Zaltzman: Ever since I was a tiny child, I’ve had a fear of audience participation. I want my entertainment to be over there and me to be over here and for my entertainment not to interact with me. Nor I with it, because that’s too much like work. Same goes for ads.
Also, one British TV channel’s online player often has ads where I see my name written across the product. That’s not cute, that’s creepy! I’m not on first name terms with you, product! But, fuck it, if this is really the future we’re facing, go big: Disneyland, but for Squarespace.
Matt Gehring: As a brand, I love the idea of interaction, but I do not love not that happening outside of my preferred environment. It would be another platform we need to monitor, track and engage on, and trying to manage all those interactions across hundreds of podcasts would be very tough. Hernan is right: just keep it simple.
Finally, I (Ashley) have this great fear that podcast ads will soon become like any other programmatic or retargeted ad around the web: deeply impersonal and tied to your listening habits, recent purchases, or other web activity. Should I be afraid of this future?
Hernan Lopez: You should not be afraid of it because I don’t think there’s anyone in the industry that wants this to happen. Although someone can make the argument that today’s ads are impersonal, since everyone gets the same ad regardless of whether they’re a potential buyer of mattresses or not.
Helen Zaltzman: Ashley, I will write ludicrous idiosyncratic ads just for you until I have withered into dirt.
Krystina Rubino: I mentioned earlier my fear of programmatic technology being applied to this medium before it’s ready. I don’t think we need tin foil hats yet, but there will be bad actors who look at an industry like ours from the outside and see a monetization opportunity without understanding how it all really works. But I’m optimistic that most advertisers and networks understand the value of their content and aren’t rushing to commoditize the medium.
Matt Gehring: Agree with the group here. I think we are a long way off from retargeting and elements like that (but it will likely happen at some point). As Hernan pointed out though, it is somewhat up to the creators to keep it from happening.
Helen Zaltzman: We creators actually have very limited power in this situation. I believe the results are best for both the brand and the listeners when, e.g., I script and voice the ad myself, and make it fun and a bit silly; but if the sponsor doesn’t agree, they will just not buy ads on my shows. Ultimately, the ones who are spending the money control this.
Anything else you would like to say about the past, present, or future of podcast advertising?
Hernan Lopez: The podcast business is still in the early stages of development. Podcasts account for about 7% of all addressable listening time but only 3% of the audio advertising pie, which itself is low relative to its share of media time spent. It’s impossible to think that the dynamics in the space will remain static — but it’s also true that no one wants to fix what’s not broken.
Helen Zaltzman: I’d like everybody to refrain from making sweeping statements about it. “It sucks!” “It’s the future of everything!” “CPMs are doomed!” “Podcasts are all commanding zillion-dollar CPMs!” The truth is, podcasting and podcast advertising were growing pretty steadily for a long time, and that was working fine. Balloons work best when you don’t over-inflate them.
Krystina Rubino: Yeah, it wouldn’t hurt everyone to chill out on the dramatic claims over what the medium can do, or dire warnings about the sky falling if a closed platform succeeds. The present and future of podcast advertising are bright and dynamic. And we at Right Side Up believe that the future of the channel is brand direct, which is why our service model is unique, i.e. in-house consulting and administration of podcast and other offline growth programs. We’ll see the medium grow up and lose some of the information asymmetry that has made it more difficult for brands to enter.
Before Facebook and Google became ubiquitous among advertisers, there was a period of time where a small share of agencies and brands knew how to generate staggering growth via those platforms. Eventually that curve evened out, and these platforms became synonymous with digital advertising. I’m optimistic the same thing will happen here, where podcasts become a part of the overall media mix for more and more brands as time goes on.
Matt Gehring: I have seen the podcast ad space evolve since the very beginning when everyone was in endorsed radio and everyone was mostly writing it off. It’s nice to see that now most of a brand’s radio/podcast spend is dominated by podcasts. I am excited about the future for podcasts — the audience continues to grow and the content gets better and better.
The Bello Collective is a publication + newsletter about podcasts and the audio industry. Our goal is to bring together writers, journalists, and other voices who share a passion for the world of audio storytelling.
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