Is Selling Ads On Your Podcast Worth A Dime?

Podcast advertising is how many podcasts achieve commercial viability. But that requires scale, and the amount of scale is always increasing. Here’s where the bar is set today and what that means to your podcast’s bottom line.

February 19, 2020

Article

Podcasting is the weirdest industry. The same people who ask, “What is the absolute cheapest way I can get started podcasting?” are the very same ones who after a week ask, “How much money can I make selling ads on my show?”

No, that's not unique to podcasting. But for anyone who’s made a commercially viable podcast, it’s worthy of a facepalm. 🤦

Last week at Podcast Movement Evolutions 2020, I paid a lot of attention to the conversations regarding podcast advertising as a business model. Mostly because of the new moves in podcast ad tech (something I’ll dig into in future episodes) that are increasingly interesting to my ex-ad-exec brain. But also to better understand where the threshold is today for having a show with an audience size big enough to be attractive to advertisers.

(Nota bene: I recognize there are many, many ways to monetize a podcast other than selling ads. I further recognize that super-niche shows don’t feel the same pressure to grow giant audiences the way more general or entertainment shows do. But we’re not talking about those today.)

Let’s start by being real about selling ads: Someone has to do it. It’s not like an army of ad sales reps are ready to pounce as soon as you hit some download threshold. Once you hit a number worthy of the ad sales reps consideration, you still have to reach out to them. Or switch to a hosting provider that works directly with ad sales reps so they see how large your show is. Regardless, there’s more to this than just hitting a number, OK?

So what’s big enough to be worthy of consideration? For many years, the threshold tossed around the community has been 5,000. No, not 5,000 total downloads over the life of your show. 5,000 downloads of a single episode of your show after it’s been live for 30 days. (If your podcast hosting company hides this number, well… I feel ya. Chartable will help you understand this better and likely works with your current podcast media hosting company. And it’s free!)

But according to the people I spoke with and saw on stage last week, that 5,000 download number is woefully out of date. The new threshold floated around was double that. Or quadruple that. Or in the case of one big direct response advertiser who talked about the success his company is having with podcast advertising, it’s 10x that. His team won’t even consider booking ads with shows that have less 50,000 downloads per episode after 30 days. Why so hight? Because it’s just not worth their time to set up the ad codes, the tracking, and all the complexities that go into setting up a new place to run ads unless the scale is there.

I spoke directly with a couple of ad sales companies who now set 20,000 as the number they're looking for. Maybe they’ll back down to 10K if the show has an audience that directly fits the demographics of ads they are already running on other shows. Maybe.

But all of those numbers are a long way away from 5,000 (and certainly nowhere near the average number of 150) so that's the reality.

It helps to look at the question of “how many downloads do I need?” through the lens of commercial viability. And all you need is to understand these five numbers:

Monthly downloads - Let's say that you are consistently pulling 5,000 downloads per episode.
Sell-through rate - It’s really hard to sell 100% of your inventory, so let’s say you’re only able to regularly book ads for 50% of your available inventory. That's a realistic number. Some of the podcasts that I talked to sell a lot more than that. Some sell less.
Ad spots per episode - For this exercise, let’s say you're willing to do two ads per episode
Episode frequency - We’ll assume you do an episode every single week, so that's four episodes per month.
CPM - $25 is a good placeholder CPM (cost per thousand). I've seen more. I've seen less. Let’s use this for an average.

Here’s how the math works:

5,000 downloads * 50% sell-through = 2,500 “monetizable” impressions
2,500 impressions * 2 ad slots = 5,000 sold ad spots per episode
5,000 sold ad slots per weekly episode = 20,000 monthly sold ad slots
You get $25 for each one thousand impressions, or 25 * 20 = 500

That’s easy math, and it shows that 5,000 downloads can realistically become $500 per month. Put another way: that’s a dime per download.

I think you would agree that it’s very difficult to run a commercially viable business with a revenue stream of $500 per month.

If you double that and have 10,000 listeners, then you’d get $1,000 a month. Again, it’s very hard to run a commercially viable business with an income stream of $1,000 per month. A grand a month isn’t bad money for a side hustle. And it’ll certainly cover your costs as a hobbyist. But it’s a long way from commercial viability.

Which brings us back to the 50,000 number. With the helpful a-dime-a-download conversion, we’re at $5,000 per month. That's a decent starting revenue stream, but any business would need more revenue streams than that before achieving commercial viability.

So here’s a radical thought. Assuming your show is not yet at that level (most aren’t), and further assuming that you aren’t financially ruined if you eschew the $50 or $100 a month of ad revenue you might get from some of the self-service podcast ad providers…

What if you focused on growing your show through word of mouth?

I recently spoke with a very successful podcaster who pressed home this point: don't underestimate the power of spending an entire year where the only action item you give your listeners is to have them tell someone else about your show. No appeals to donate. No appeals to rate or review. Only a single call-to-action, repeated in every single episode for a year, that sincerely asks the listener to tell one friend about the show each and every time they listen.

If it works for you as it worked for the podcaster mentioned above, all those requests could pay off by having a show that does meet the threshold where commercial viability becomes more realistic.

So let’s try it. If you got this far, you're either a working podcaster or you know working podcasters. Would you find one of them -- just one -- today and tell them about my show, Podcast Pontifications? Even if you’re just reading this article on my site, on Medium, or wherever you found it, send out an email, shoot someone a direct message, or just do whatever to tell a podcaster you know to check out Podcast Pontifications to hear a different take on the future of podcasting. They’d be into that, right?

And in the meantime, I shall be back tomorrow with yet another Podcast Pontifications.

Cheers!

Transcript

Podcast advertising is how many podcasts achieve commercial viability, but that requires scale and the amount of scale is always increasing. Here's where the bar is set today and what that means to your podcasts. Bottom line.

Hello and welcome to another podcast. Pontifications with me. Evo Terra. You know, podcasting is the weirdest industry. The same people who ask, what is the absolute cheapest way I can get started? Podcasting are the same ones who week later say, how much money can I make when I sell ads on my show? It's a weird, weird difference between, I want to know money invested, but I want all the money on the backend.

It's natural. I'm like, that's unique to podcasting, you just the way that you know people's brains work, they want. Yeah, I get it. I totally get it. So when I was at podcast movement evolutions, 2020, that's a lot of words. Uh, last week I spent a lot of tension listening to what people were talking about in the new ad tech world.

This new, well, it's not really new, but this ever-increasing world where advertising and making money, making shows commercially viable. You heard me talk about that on Monday, was the big theme. And a big part of that is advertising dollars, right? How much money can you actually make? And I think that that's something worthy of a conversation.

So we're going to have it today. Your concept of your idea, if your desire is to make a commercially viable show, how much do you need? How much can you make with the quarterly viable show? So it's as a supply and demand problem at its, at its heart, you know, you can, the reality is, look, if you suddenly get a really popular show, yeah, maybe somebody will reach out to you and say, Hey, your show's popular.

I'd like to sell advertising for you. But that's usually not the way that it works. When you build a show up to a certain level so that it becomes attractive to advertisers. And then you take that new found attractiveness and tell. The people who sell advertising about your show, and you can do that by going to the big networks out there.

There aren't nineteens that podcast ones, those kinds of people, so that they, with those with a team of sales reps can say, Oh, now that you're on our platform, we can see how much you do. Great. Let's go sell advertising. Or you stay where you're at and you contact a company like a true native media. Hi Heather, and say, Hey, I've got a show that's worthy of your consideration.

Let me go. And occasionally, very occasionally, you actually might hear directly from advertisers who might reach out because they've seen you get listed on them on a list somewhere. Somebody else has told them about you and you say, Hey, that's the right kind of audience for us. Um, we'd like to advertise on your show if it's big enough.

And that's really the big factor here. If it's big enough. Now for the longest time, the, if it's big enough number has been around 5,000 by the way, I don't mean 5,000 total downloads over the life of your show. I mean 5,000 downloads of an episode of your show after the course of 30 days. Which, by the way, if your podcast hosting company doesn't make that easy for you to see, I feel ya.

But nonetheless, you have to understand it. Services like chartable, by the way, chartable will give you that information. Yeah. Anyhow, 5,000 downloads used to be the really. The, the number that you would use to get attracted to become attractive to the people who spent spent money on advertising? Well, at podcast movement evolution is 2020 in LA last week.

No one was using that number. That number is dead. I think it might still be viable for some, but the number that was floated around was double that or quadruple that. Or in some cases, 10 X that. One advertiser on stage says 50,000 minimum. That's 57 50,000 downloads per episode after 30 days minimum for them to consider advertising with you because for them it's scale as well.

I heard another ad sales company say 20,000 is the number they're looking for. Some have said, you know, they'll, they'll, they'll maybe back down to 10 if there's an existing relationship or they have ads already running on other shows, and your show fits that demographic. Ten thousand twenty thousand fifty thousand not 5,000 and certainly not 150 so that's the reality.

And I wanted to break that reality down for a moment and move that reality from, can I get advertising to, is it going to be commercially viable? And I did a little bit of math and the math isn't hard. Trust me when I do the math and my math works, something like this. Let's say that you have 5,000 downloads per episode, and let's say that further than that, you get, let me pull my numbers up here on my sheet.

So it's exact. Let's say that you are 5,000 downloads per episode and you're selling 50% of your available inventory. I think that's a realistic number. Some of the podcasts that I talked to sell a lot more than that. Some sell less, but let's say 50% so only half of those episodes can you sell ads on on a regular basis, and maybe you're willing to do two ads per episode and you do an episode every single week.

So that's four episodes per month. And then finally you're getting a $25 CPM. I've seen him more. I've seen less on average $25 CPM. If you do the math on that, those 5,000 downloads become $500 per month, $500 per month, which means a dime per listener. It's really hard to run. I think you would agree, a commercially viable business.

With a revenue stream of $500 per month. If you double that, if you have a thousand if you had 10,000 listeners, then you've got $1,000 a month. Also very hard to run a commercial lead viable business with a revenue stream of an income stream of $1,000 per month. Can you run a side hustle? Sure. Can you pay for your hobby?

Absolutely. But thinking about commercial viability, that's what it requires. The 50,000 number, not only to be attractive to the people who sell the ads, but also it shouldn't be attractive to a business person who says, how can I keep that going? But remember, $5,000 a month is not a fortune by any stretch of the imagination.

That's, that's a decent starting revenue stream, but you have to have other things really happening before it's commercially viable. So I say this to you, the working podcast or who may not be at that level but wants to become at that level to think about it this way. Those ad spots you desperately want to sell, have to be a value to the other person.

Do the person on the other side giving you money rather than nickeling and diming yourself at. $50 a month, $100 a month possible ad revenue. And again, I'm not begrudging you that, I'm just wanting you to think of it a different way. What have you spent those ad spots on yourself? What if instead of advertising for somebody else, you advertised for yourself, not your product and service, although maybe you could do that, but a pretty successful podcast or I spoke with last week said, don't underestimate the power of.

Telling your people, giving them one action item for an entire year, and that single action item is to tell your listeners to tell someone else, just one more person to listen to the program. Instead of confusing them with, go here to give me money. Go here to rate and review this show. He says, looking at himself directly.

What if you just said, go tell someone about this show. How would that work for you? Speaking of that, go tell someone about this show. Would you, you're a working podcast or do you know whether they're podcasters? Are they listening to podcast? Pontifications man, I'm thinking it might be an interesting experiment for you just to pick up that email, grab a tweet, do something, and just tell someone, check out podcast pontifications this dude has some interesting thoughts you should know about.

Let's give it a shot. Okay. And in the meantime, I shall be back tomorrow with yet another podcast. Pontifications cheers.

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