If you don’t cast, you’re last: inside big tech’s podcasting goldrush
Podcasts are big business in 2021. Tech giants, some with voice assistant tech, see audio streaming as an untapped advertising surface that they can modernise and lead. But as the borders are drawn, how will the experience change for listeners and the advertisers fuelling the boom?
”It is a sticky and intimate medium. The sound emanates from the centre of your skull.”
One-in-five digital US radio ad dollars are predicted to go toward podcasts in 2021. It is the first time it will breach the $1bn mark, according to eMarketer. And with WARC predicting 38% of marketers are planning to boost podcast spend in 2021, tech giants are speculatively panning for gold.
The Drum looks closer at their moves.
Incoming tech players
Big tech is rallying around podcasting. Distribution, scale and advertising come easy to them and they see an opportunity.
Spotify recently became the world’s leading podcast platform. In Q2 2020 reportedly 42% of podcast listeners used it. Apple placed in second at 32%. It already had a huge share of audio listeners but with podcasting, it grew its appeal and kept existing users in the app longer to drive premium subscriptions.
It entered podcasting late in 2018 and acquired Gimlet, Anchor and Parcast, as well as talents like Joe Rogan and the Obamas. Exclusivity is key here, which is unusual since most producers distribute podcasts as widely as possible. Spotify is incentivizing the opposing strategy. And maybe that’s OK: the potential audience in Spotify is huge. In the UK, Spotify podcast listeners grew by 11.4% 2019 through 2020. It expects another 10% this year.
There’s more content, more income and more listeners – the 16-year-old platform’s had an unmissable growth spurt.
Apple reportedly builds a podcasting subscription product for fears of “losing out” on the current boom. Apple’s iTunes has hosted podcasts since 2005. One study shows that Spotify caught the market leader by December 2019.
Apple’s original podcast output has been limited to self-promotion so far. But with its huge footprint, it is never out of the race. It has audio originals in the works, building upon its gaming and TV verticals.
YouTube, however, lays dormant. Top podcasts inevitably live there with cam footage or a still image but it is a force fit. Premium users can listen in background but most free users must run the video - which clashes with the on-the-move, passive podcasting experience. Still, with its voice tech in many homes dying for content, and its formidable recommendation engine primed, it is only a matter of time until YouTube awakens.
Late in December, Amazon made a play into podcasting by buying Wondery, an independent podcast network. It knows that the network will add value to its Alexa voice-controlled ecosystem. Promos through Amazon Music and even Audible could accelerate ambitions. Amazon Music only launched podcasts in September 2020, so it may be two years behind Spotify – but its war chest could close the gap. Meanwhile, Amazon-owned Twitch could come into play, if fans felt like watching podcasts unfold live.
Let's explore why the gold rush has just attracted the big tech prospectors.
Historically, podcasts were distributed by RSS feed. Shows partnered with a brand for a season and burned host reads into the audio file. Brands would know they're building brand awareness among a rough estimate of listeners.
It's a “primitive” approach by 2021 standards, big brands need more says Conal Byrne, president at the iHeartPodcast Network. He oversees production and distribution of around 500 podcasts, 150 of which come from its 900 radio shows. It's one of the world's largest podcast publishers. He's been in podcasting for a while and describes the monetisation in waves.
iHeart boasts 100,000 episodes – listeners still access old ones – so the entire database was retroactively tagged by category, so relevant ads could be dynamically inserted in the middle. It was one of the pioneers here.
Byrne says: “If we weren’t able to do this, we couldn’t build a truly compounding business.” New ad campaigns popped up in old episodes with new inventory.
But in programming the ads, Byrne says: “They should feel as close to burned in as possible. The CPM in podcasting is so high when you do that.” Relevancy is key and that's where targeting (the third wave) came in.
Marketers accrued more information on audiences and could subsequently geo-target them. Banks can tell listeners about local branches, musicians sell tickets at the nearest arena, Under Armour talks to me about running the streets of Glasgow.
So now we reach the fourth wave – and the most interesting to modern marketers – attribution and measurement. Groups like the IAB are still developing measurement standards for podcasts, and the body currently “discrepancies across podcast publishers and tech vendors” but there's a lot of guesswork still.
Distributors can now pixel their RSS feeds. It's a bit of code that informs marketers if the podcast sends them any traffic, often with a bespoke discount in hand.
On the buy-side, inventory is increasingly being bought programmatically. From 2020 to 2022, eMarketer predicts that we will see programmatic shift from 4% to 8% of all podcast spend in the US. Its introduction threatens to reduce the quality of a medium that emerged, in part, as an escape from advertising; and it contrasts with the partnership model where relevancy is usually guaranteed.
Those who up ad loads or lose relevancy, or erode the intimacy of a host read will perform poorly. “Listener engagement is unique, completion rates are very high, ad skip rates are very low,“ says Byrne - but they need to stay that way.
iHeart recently bought podcast platform Voxnest to better compete on the ad front. Everyone has to follow the money.
Podcasting offers a great user experience. Tech giants threaten to add friction.
“Amazon and Spotify are acquiring SMEs to paywall their content and drive subscribers for that platform. I’m not sure it’s a good idea for creators, the listeners, or the sponsors,” says Byrne.
Podcasts that are harder to access will be left behind. As will those who don’t build for the future.
Byrne says: ”TV took 100 years to reach ’peak content’. True crime and chat shows, mostly by white people, have dominated. That was OK for a second, but now we have got to branch out.” He sees predicts growth in cooking, travel, fiction and other untapped niches.
Christopher Phin, head of podcasts at DCT Media, oversees a growing stable of 10 podcasts that serve regional news audiences in sport, politics, gardening and education. They have niche appeal, but that’s very much the point.
“We are hyper-serving areas that are badly served by the BBC and the broader media apparatus,” he says. It is still a new push but very much represents how sustainable models can be built at a reasonable scale. DCT’s podcasts are hitting around 1,000 downloads a day but Phin's very much still learning how it clicks with the wider organisation.
He speaks up the benefits. ”It is a sticky and intimate medium. The sound emanates from the centre of your skull. There is literally no way to get closer to someone.”
But he also talks up the passive nature of podcasting. Listeners are a fly-on-the-wall for interesting conversation while washing dishes, exercising, or working. Other media like video and reading don't plug into these times. So it increases the available hours of the audience.
Phin’s aware he needs to better monetise audiences - but other than live events, the most direct path isn't necessarily the best option. The likes of the Financial Times and The Athletic are using podcasts for customer acquisition (and to live on a host of new devices). These are vehicles to build brand love – and brands know this.
The honeymoon period is over. Things are getting real. Phin’s concerned about the coming “siloing and Balkanisation” of podcasting by the tech giants. They get to shape the landscape as they please.
David Cantello, founder of Front Ear Podcasts, says tech giants are driving the innovation. “Everything is driven by algorithms now - they are all competing on the algorithm. Who can place adverts quicker, better and in a more efficient way.”
Cantello meanwhile still favours the sponsorship model and host reads. As does DCT. This approach still brings out the strengths of the medium.
Cantello says: ”No one wants to get bombarded with shit. If it grows too quickly, there's too much advertising and it will be like watching TV or listening to radio where the ads aren’t really directed to you.”
Matthew Rouse, a consultant and former Mindshare AV specialist, offers some final thoughts to marketers exploring podcast spend.
First, don't repurpose a radio spot. “When listening to a free podcast, you’ll accept an ad or two in there. However, a 30-second commercial radio spot might do the job from a car radio, but it can sound pretty jarring when heard in the middle of a podcast – especially through headphones.”
And then there's trust. A host can’t endorse Haagen Dazs ice cream one week and Ben & Jerry’s the next. It tough to find the right show to fit. And brand safety tools are still in their infancy here too.
Next, he sees an “elephant in the room”. If the tech giants develop ad-free models, what happens to all the podcasts with burnt-in ads? Do they lose a platform, or must they edit them out?
And finally, subscriptions are coming. Rouse thinks exclusivity windows could put free listeners as much as one month behind paying listeners. ”With nearly half of all podcasts listened to being released in the last seven days, this compromise could curtail future growth and discovery.”
There’s talk of the bubble busting – but you’d hope the tech companies, who have more media consumption data than ever before, haven’t over-committed to capitalise on the gold rush. They wouldn't have been the first to have fallen for fool’s gold.
This feature ran on The Drum’s Future of Media briefing. You can subscribe to it here if you’d like it your inbox once a week.