This article, “A Rise in Podcast Advertising Power”, is part of a series created from the Ossa Lounge LIVE show at Podcast Movement Virtual on October 20, 2020, “Rogan, Rona, and ROI: 2020 Podcast Trends & What’s Next for 2021?”
By the Numbers
The ad industry has been hit hard by the COVID pandemic, with losses reported in nearly every market segment. This is what makes the performance of podcast advertising in 2020 truly remarkable — it is one of the only advertising sectors expected to end this year in the black with 14.7% growth.
Admittedly, this is down from the pre-COVID 2020 growth projection of 29.6%, but given the unexpected challenges faced by the ad industry this year, it is still a major feat. However, this ad sector’s 2020 performance won’t truly be known until after the end of the year, when the results of Q4 roll in. (Notably, approximately 1/3 of all U.S. podcast ad revenue is typically generated in Q4.)
This 14.7% growth brings annual podcast ad revenue total even closer to reaching a major milestone. Last year, podcast ad revenue increased by 48%, ending the year at a total of $708.1 million. Figuring in the projected growth by year-end, this positions annual podcast ad revenue to cross the groundbreaking $1 billion mark in 2021 — a milestone that will likely solidify the value, resiliency and long-term viability of podcast advertising.
However, some industry experts see the $1 billion projection as too low of a bar to set for 2021, given the current growth trajectory.
“We believe the IAB’s estimate of $1 billion podcast ad spend in 2021 is super conservative,” said Lee Brown, VP, Global Head of Advertising Business at Spotify, “With audience consumption growing and voice-activated devices, there are a lot more opportunities in podcasts ahead of us. Most [people] anticipate the next frontier of media, and that’s going to be in audio.”
Further proving its value, the podcast industry reported a 44% increase in advertising impressions month-over-month from January through June 2020, even as COVID took a huge toll on advertisers’ ROI across many other sectors. Below, we examine some of the key reasons that podcast advertising was able to shine through the destruction, downturns and widespread disadvantages of 2020.
Adaptability
The quick adaptability of podcast ad messaging became a huge asset during COVID, as many brands found themselves scrambling to switch out campaigns that no longer aligned with the psychology or priorities of their audience.
“Audio’s much easier and much more efficient to change,” said Stephanie Beran Sanderson, the Director of Strategy at creative audio agency Wordsworth and Booth, which has reworked several client podcast ad spots. “A brand that wants to change its messaging and assets for a podcast campaign can overhaul everything in a matter of days,” Beran Sanderson said.
Accessibility & Safety
As branded content and video ad production slowed to a crawl for many publishers and agencies, the value of podcast ad production was able to shine in a new way.
Since the tools and resources required to create new podcast ads were accessible to producers stuck at home, podcast ad production was able to carry on. Brands that had invested in podcast advertising were able to utilize the industry’s universally-accessible tools to their advantage.
Unlike companies that had invested their entire budget into digital, TV or print advertising, brands that were advertising on podcasts were able to launch new campaigns and revise their messaging as needed throughout the pandemic.
Economic Downturn Mentality
iHeartMedia CEO Bob Pittman identified another reason for the growth of podcast advertising in 2020: advertisers are more willing to take a chance on new media during an economic downturn. Best of all, the gamble paid off — with new advertisers reportedly seeing their podcast ad revenue grow at a rate 3 times faster than usage growth.
New Technology
In 2020, Spotify continued to implement their bullish strategy to become the number-one name in the podcast industry. One strategy that Spotify has utilized to get the upper hand is the implementation of new technologies, like algorithmically-generated podcast playlists and ad insertion.
By compiling podcast playlists based on user behavior and integrating its own advertising tool — Streaming Ad Insertion — Spotify has been able to place targeted ads into shows in a new and powerful way. This has obvious appeal to podcast advertisers, who want to achieve the highest return on their investment.
2021 Projections
The weight of bureaucracy at many large companies and corporations makes them slow to transition to new advertising strategies. It is far easier to stick with the status quo and continue in the advertising sectors that have already established a track record of success.
Podcast advertising, as the new kid on the block, is no exception. However, lean DTC companies like SimpliSafe, Cash App, and Squarespace were early adopters, and have seen massive returns on their investment. Because of this, there is likely to be a gradual “trickle up” effect to larger companies in the next few years.
Alban Brooke, Head of Marketing at Buzzsprout, echoes this prediction, believing that the podcast industry will see an increasing number of larger brands and ad agencies working podcast advertising into their digital ad spend in 2021. He also expects to see some prominent acquisitions by digital advertising groups like Facebook & Google.
The expanding market will create an increasing need for precision targeting at scale, and programmatic advertising offers a solution. Although host-read ads have been established as the preferred medium of many podcast advertisers thus far due to their high engagement rates and superior returns, this is likely to change as the industry continues to grow.
In some cases, the transition to programmatic advertising has already begun. In the first six months of 2020, Adswizz reported a 37% increase in podcast ads delivered programmatically on their platform.
The desire to be able to track podcast listener behavior and leverage that user data in targeted advertising campaigns will continue to increase. With the ability to have higher confidence in their messaging placement and campaign results, many new brands will have the newly-minted confidence to enter into the podcast advertising space.
With the implementation of new technologies like contextual targeting on the horizon, the podcast advertising space is positioned to become more valuable than ever.