A Future Reckoning For The Podcast Ad Bubble
I don't think advertisers are ever going to get completely out of podcasting. But I do think there's a reckoning coming for podcast advertising... and it might sting all of us.
Even if the episodes of your show are purposely ad-free, like mine, you know that somewhere around $500 million was spent last year on podcast advertising. Not surprisingly, that number is projected to go up and up over time. This projection, like most ad revenue projections, is largely based on one key factor: that advertisers feel that advertising on a podcast is more effective than some of the other mediums where they advertise.
The key word you might have missed: feel.
Advertisers feel the live, host-read ad is the best ad format. This ad format allows the host to get more in-depth and better work the ad into their regular episode content. Advertisers feel that the audience is more likely to listen and pay attention to these sorts of ads. So goes the theory. Generally speaking, I agree with the theory. But that’s also why the current podcast advertising bubble is in jeopardy of popping.
Regular listeners to the show have heard this message from me before: It's way too complicated to make live, host-read ad buys at scale. The warm, fuzzy feelings advertisers get when they run live, host-read ads on a handful of podcasts quickly diminishes when they try to scale that to hundreds or thousands of shows.
Possibly worse: maybe advertising on podcasts with live, host-read ads isn’t quite the money-printer some have billed it as. What happens when the positive feelings aren’t reflected in the data, and the less-exuberant executives controlling the purse strings demand accountability?
But big deal if you don’t run ads on your show, right? Wrong.
The reason I say that the collapse of the podcast ad bubble is going to sting us all is due to stifled creativity. A large percentage of the new podcast content is coming from professional production houses. They aren’t doing it for the passion. They’re doing it because they want a piece of that projected-to-grow ad spend.
I say “stifled creativity” because these professional production houses are investing hundreds of thousands of dollars to make amazing podcast content that attracts not just current listeners, but also brings people into podcast listening just to consume that amazing content. The company bankrolling those creators speculates that they can make the kind of content that attracts a large audience, which in turn is attractive to advertisers to fund their initiatives.
If the ad bubble pops, the incentive to take these big creative risks will diminish, meaning less creatively bold content will be produced, which leads to less of a reason for people new to podcasting to experience our medium.
So advertisers who want to spread their spend can’t, so they’ll look for more big blockbusters. But the popped bubble means fewer blockbusters, so the willing advertisers are stuck in a vicious cycle.
Some enterprising person is going to come along and solve this problem. But after seeing several failed attempts I’m convinced that the solution to this problem means an overhaul of what we think is working now.
The current gold standard of podcast advertising can’t scale. Whatever the new advertising options are, they will likely be much less effective than the gold standard of today. And what those ads lose in efficacy, they'll make up for in scale. Yes, smart advertisers are more than willing to accept less performance if their ads can be spread across a much wider field for less money. ROAS is applied to the entire campaign, not just an individual ad unit.
That effectively means a devaluation of impression-based ad buys, which means less money for most indie podcasters who have built up enough of an audience to be attractive to advertisers. So unless you run a podcast network with hundreds of different shows, you can expect even less of the pie.
But won’t someone think of the listeners? More efficient-to-buy but less effective-at-converting ads are more annoying the people forced to sit through (or skip) them. Increased annoyance means less response from users, which means less valuation placed on those advertisements themselves, which means the less that the advertisers are willing to pay per placement. It's a rough and tumble cycle that most of us can’t make up for in volume.
Still, I think my biggest concern for all of us in podcasting -- even those of us who do not run ads on their shows -- is that the financing of high-end content will falter, which reduces the number of new listeners entering our medium. Not that indies can’t make great content! Clearly they do. But big-budget productions also come with big-budget marketing plans that reach people at scale in a way that indie podcasters simply can’t do.
Today, influencer marketing programs are going through a rough time, as savvy business people are taking a closer look at the value they get for their influencer marketing campaigns. Podcast advertising bears a remarkable resemblance to this current crisis. What happens when those repercussions spill over to us?
In the future, we will see the podcast advertising landscape change. But probably not in a way that’s better for podcast creators.
Advertising is never getting completely out of podcasting. But I don't think advertising will always be the lion's share of podcast-derived revenues. As these new revenue pathways develop, perhaps they’ll be a little less-speculative in nature.
Then again, maybe my pessimism born from spending over 15 years in the digital advertising business is causing me to be biased. The line between skepticism and cynicism is small, and there’s a good chance I’ve crossed the line. If you think so, tell me. Either here as a comment, or on Flick.group/podcastpontifications. That’s a private -- and totally free -- app where you can call me out, agree with what I have to say, or join in the conversation with other listeners.
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I shall be back tomorrow with another Podcast Pontifications.