Are we entering the Golden Age of Podcasting?

Back in 1922, AT&T ran the first-ever radio commercial on its station WEAF in New York -- it was categorized as a toll broadcasting opportunity. Advertisers would underwrite a broadcast in return for having their brand mentioned on air. This form of radio advertising became more and more popular, leading stations into the golden age of radio. Audio, in the form of radio, was one of the first forms of in-home entertainment before the advent of television -- and its resurgence in the form of podcasting was predicted by Steve Jobs, back in 2005:

Podcasting is the next generation of radio and users can now subscribe to more than 3,000 free podcasts and have each new episode automatically delivered over the Internet to their computer and iPod.

Earlier this month, the Interactive Advertising Bureau released a report on the state of podcast advertising, predicting revenue would top $1 billion in 2021. Whether this is hype or reality, it is clear that brands are jumping on the bandwagon to give this new channel a shot, spending a total of $479 million on podcast ads in 2018 -- a 53% uptick from $314 million in 2017. More than half (53%) of those listeners tune in to YouTube for their podcast content, compared with 29% for Apple and 28% for Spotify. We are also seeing more players enter the field, with Sony Music announcing last month, a new joint venture with two veteran podcast producers: Adam Davidson, a New Yorker staff writer and co-founder of NPR’s “Planet Money” show, and Laura Mayer, who has worked at Stitcher, Panoply Media and WNYC.

The extent to which the $1 billion prediction will come true will depend on three things: Scale, Attribution and Innovation.

Scale

There has been a surge in growth in podcast listening in the US, with more than half of the 12+ population listening to a podcast and 62M Americans listening each week. Importantly for advertisers, this audience is receptive to ads, with 78% of podcast listeners stating they don't mind ads or sponsorship messages, which they recognize as necessary to support the free content, per WARC. In fact, the Acast Audio Intelligence Report in 2018 showed that podcast ads perform well in terms of engagement and responsiveness and most importantly, it has proven to be an effective vehicle for reaching more elusive affluent and discerning customer segments. This has meant advertisers have ventured beyond the typical lower-funnel DR focused campaigns and have started incorporating brand-building KPIs also.

One of the issues with achieving scale with podcast advertising has been the production and customization of the ad "scripts". Today, many of the hosts of popular podcast shows read the scripts during the show, which makes it very hard to scale. Partners, like Spotify and iHeartRadio, are able to manage rich ad creative ensuring customization by tonality, feel and voice to ensure an organic and seamless integration into the podcast content, with 58% of ads reportedly integrated into content. This makes for a very different user experience compared to radio where longer ad breaks are entirely separate from the core content. Given the proliferation of different podcast genres from news, crime mystery, science to comedy, tech and family, consumers have a smorgasbord of choice depending on their interests, mood and listening objective (be entertained, educated or informed).

Attribution

Today, measurement and attribution is constrained by the fact that advertisers don't know if consumers actually listened to the podcasts they've downloaded. Only once we see a shift into more podcast streaming will we be able to have more accurate forms of measurement. In addition, given there is no industry standard for measuring listener's time spent and podcast advertising's impact on brand awareness, engagement, purchase intent or ultimate sales, there will be a limitation to how much brands will be willing to invest.

As smart speakers enter the podcasting game with shorter-form, bite-sized and contextualized content (think Glamour's What I Wore When for inspiration as you're deciding on fashion choices for that significant birthday celebration), we will need new tools to measure engagement across your podcasting day and across smartphone, smart home and other IoT devices -- both in the home and out of the home.

Another measurement opportunity, in the future, will be to assess the level of engagement with innovative audio search technologies, that impact discovery and listenership. The measurement ecosystem then will span not only user behavior (listening time, engagement, abandon rates, repeat visits, shares) and brand metrics (awareness, lift, recall and purchase intent), but also ad format effectiveness (sponsorship, product placement, brand integration, podcast preview art, search ads). As experimentation continues with story formats in video and audio (podcasts, music, audio books), advertisers will need to understand how to measure not only across these platforms but also across consumer mood states -- which has been shown to be a predictor of ad receptivity. In the news publishing world, the venerable New York Times put this to the test when it piloted ad placements based on the emotions certain articles evoke. “Project Feels” has now generated 50 campaigns, more than 30 million impressions and strong revenue results. ESPN and USA Today have launched similar approaches.

Innovation

While there is no shortage of rich content options for podcast listeners, additional growth will depend on innovation across even more diverse and interactive content, multiple revenue models, programmatic ad buying, engaging ad formats and more accurate, real-time audience measurement as we referenced above.

According to Eric Diehn at Stitcher, "as we see greater long-tail hosting options, dynamic ad insertion, programmatic infrastructure and more dollars flowing into the industry, it will be become necessary to have pre-recorded and independently-produced spots". These spots will need to be as beautifully crafted as the podcast content itself -- opening up new revenue streams for agency and independent creatives. The key will be to grow revenue and advertisers without ruining the listener experience.

Just like we have seen in the video streaming space, we will find innovation across different revenue models from ad-supported and free to ad-free subscription-driven models. From Luminary to Stitcher Premium, from Wondery+ to Patreon, more and more platforms will enter the space but there will be only a limited number of winners.

One of the bold winners so far has been Spotify, which has positioned podcasting as their ticket to becoming the world's biggest audio platform. With 207 million active users as of its latest quarterly report, it is investing in original podcast content with its in-house Spotify Studios unit. Its recent acquisitions of Gimlet Media, Anchor and Parcast give the company greater expertise to support its ad business and margins. Similar to how we saw Netflix enter the original production game with House of Cards in 2013, Spotify will produce more of its own shows to cut royalty costs for podcasts licensed from outside sources. The company's gross margin of 26% last year indicated that three-quarters of its income was paid out in content acquisition fees, per WARC.

In terms of content innovation, we will see a move towards the mainstream to attract broader audiences, as well as user-generated playlists, discovery and AI-driven recommendation engines -- well-loved and familiar features of the music streaming services.

This is not merely the early days of the Golden Age of Podcasting -- it is the Golden Age of Storytelling. The audio format will trigger expansion of more podcast-to-TV adaptations leading to more award-winning series. Connie Britton was nominated for a Golden Globe for her role in Dirty John, as was Julia Roberts for her role in Homecoming. And remember the podcasting craze was triggered by a gripping story -- the investigative journalism podcast, Serial, hosted by Sarah Koenig, which has been downloaded more than 400 million times since debuting in 2015. With more and more celebrity names, like Anna Faris, Will Ferrell, and Trevor Noah making podcasts, this proliferation of podcast content across platforms will continue.

The Future: Maximizing the Story Value Chain

As we look ahead, the name of the game will be I.P., as more entertainment companies across not just audio, but video, film and publishing, all enter the media and entertainment arms race around finding the next blockbuster story franchise. Intellectual property will be the most important bargaining chip -- far more important strategically than ad revenue and even short term subscription revenue. It will be about maximizing the story value chain across format, release windows, technology, devices, customers and global markets.

Whether a podcast show becomes a NY Times best-selling book, a popular Broadway show, a Netflix series, or an Oscar-nominated film, the ecosystem is going to reward the players with the boldest creative aspirations, the audacity to believe they can satisfy the voracious appetite of consumers and the relentless focus to dominate an ever-changing marketplace.

Raquelle M. Zuzarte is an award-winning global marketing leader, who has led brand campaigns at Procter & Gamble, Johnson & Johnson, Accenture, Charter, Time Warner Cable and CBS. She also recently launched Equity Project For All, a social impact venture focused on maximizing growth through building great brands  and empowering human capital.  She is a global citizen and passionate storyteller, having lived in the Middle East, Europe, Asia, Australia and the US.