Podcasts Offer Cheap Advertising to a Growing Affluent Audience

Zach Brooke
Marketing News
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Key Takeaways

​​What? Podcasts are a popular emerging medium for digital content.

So what? For the first time, podcasts are attracting major investment from startup and legacy companies as they inch closer to the mainstream.

Now what? Advertising through podcasts is cheap and personalized. Consider investing in the channel to reach the 45% of regular listeners in households earning $75,000 or more per year.

October 1, 2017

Each month, 4,000 podcasts are added to iTunes. Forty-two million Americans listen to an average of five episodes a week. As investors flock to underwrite podcast network startups, legacy media is finally investing heavily in the space. After years on the bubble, the age of the podcast has arrived

Brooke Gittings logged onto Netflix one night toward the end of 2015 seeking to unwind by viewing a few episodes of the heavily promoted 10-part original documentary “Making a Murderer.”

By the time she finished the series, she was on a path to a new career.

Gittings didn’t yet know she’d entered a new field. To this day, as the host of three successful true-crime podcasts, she views her job as an extension of her previous occupation: social work. All she knew was she needed to talk about what she just watched. She brought up her reaction to the program’s critical examination of the murder trials of Steven Avery and Brendan Dassey with a co-worker, who revealed she shared Gittings concerns that the accused were railroaded.

“We were appalled. Here we are white, middle-ish class people who view the police as our friends, and we couldn’t believe the things that happened,” she says. “Our hearts went out to Brendan Dassey.”

The two resolved to continue the conversation begun by the series. With a borrowed mic, free editing software and zero recording experience, they launched the podcast “Making a Murderer: View From the Couch” roughly one month later.

“The podcast was largely terrible … I didn’t know how to edit; I was going to the school of Google … My LLC is actually called Borrowed Equipment Pod,” Gittings says. “There were 10 episodes of the docuseries. We talked about the issues going on in each one.”

By April, the pair had run out of story to tell. Gittings’ co-host, having said her peace, was done with the endeavor as well, and ready to return to her regular life. Gittings wanted to keep going. The debate around Avery and Dassey had inspired her to look at other examples of possible wrongful convictions.

She was back the next month with a new show called “Actual Innocence.” Each episode profiled exonerated individuals. She banked a few programs to shop around to podcast networks, ultimately selecting one that specializes in true-crime stories, particularly those focused on flaws in the criminal justice system. That network, LongArc Digital Media, would later sign “Undisclosed,” a long-form wrongful-conviction podcast that boasts more than 200 million listens as of July.

“I actually got several networks that contacted me, and that was just the one I decided to go with,” Gittings says. The deal provided her with hosting services, access to professional editors and the ability to collectively negotiate with sponsors. 

Today, Gittings continues to produce “Actual Innocence” from her home in Indiana. She also started a limited-run series called “Convicted” that features an especially compelling case. It briefly ranked as the second-most popular podcast in the iTunes store before ending its run in September 2017. A third gig materialized when A&E recruited Gittings to host the podcast supplement of its popular TV show “Cold Case Files.”

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All this work allows Gittings to focus on podcasting full-time, making an income primarily from ad revenue. Her earnings were supplemented for a time using Patreon, a service that lets people donate directly to content creators, but she abandoned it after she felt obligated to produce freemium bonus content, the final straw in an already massive workload. Still, that Gittings can exclusively live off podcasts is a reflection of the industry’s growth. The fact that people like Gittings see enough opportunity to quit their jobs shows how the format, which has already endured a previous hype train only to be left for dead, has evolved into a medium with staying power.

Try to think of where you were when you first heard the term “podcast.” For many, it was in the 2000s when listeners were captivated by the peculiar, homespun philosophy, loopy poetry and consummate shit-talking of Ricky Gervais, Stephen Merchant and Karl Pilkington. The trio came out of the traditional world of broadcast radio and, on the strength of Gervais and Merchant’s smashing success with the TV show “The Office,” produced a podcast that was downloaded roughly 18 million times by September 2006, and more than 300 million times by March 2011.

For others, their introduction to the format came with the medium’s next mega-hit: “Serial.” The 12-part true-crime investigative spinoff of “This American Life”—the nation’s most popular podcast according to Podtrac—which examined the 1999 murder of Baltimore teen Hae Min Lee and subsequent conviction of her former boyfriend Adnan Syed electrified the nation. It was heavily promoted each week by the dulcet tones of Ira Glass, host of “This American Life,” to his show’s 2.2 million listeners. “Serial” debuted atop the iTunes podcast charts and remained in first for the next three months, well after the program’s conclusion. Barely four months after its release, “Serial” boasted 68 million downloads. The program’s influence radiated outward into larger culture, generating frenzied speculation on Reddit discussion boards and serving as spoof material on YouTube and “Saturday Night Live” as it helped kick-start a true-crime storytelling renaissance. 

Still, others only first waded into the platform with the 2017 release of “S-Town,” another show incubated by the team at “This American Life.” It’s a gripping tale of a gifted-but-troubled clockmaker whose unexpected death sends host Brian Reed scouring a small Alabama town for answers. The seven-episode show dropped in its entirety on March 28. Four days later it had been downloaded 10 million times. It remained ensconced in the iTunes store’s top 20 podcasts at the end of August. 

Notice the trend? With every new hit, more are finding time to download and listen. The audience is getting larger. That’s not to say podcasts are a staple media outlet at this point, but they are getting close. Nielsen’s Q3 podcast insights report finds that half of all homes in the U.S. contain podcast fans. The most recent survey data compiled by Edison Research and Triton Digital shows that 168 million people have heard of the term “podcasting” as of February 2017. That doesn’t mean they’re all listeners though; only 112 million, or 40%, of the U.S. population aged 12 and older say they’ve checked out a podcast once. The number shrinks yet again when limited to monthly listening, with an audience of 67 million. Still, that’s roughly one in four Americans who say they listen to at least one podcast a month.

Overall, monthly podcast consumers skew slightly male; 56% are men. Of regular listeners, 44% are between the ages of 18 and 34. Forty-five percent come from households earning $75,000 or more per year (whereas just 35% of American households earn $75,000 or more). Compared to all Americans, monthly listeners are more likely to be employed full-time and possess a four-year college diploma or advanced degree. An average weekly listener (estimated population of 42 million) hears five podcasts per week and has a mean listening time of five hours and seven minutes. 

It’s an affluent and engaged audience tailor-made for advertisers, and it doesn’t hurt that listeners are invested in the story and connected to the host and content in a way few are with websites. Podcast advertising network Midroll says that 61% of listeners report buying something they heard about on a podcast ad. Fifty-three percent of listeners spend at least $132 on books annually, and 28% percent spend at least $300. Thirty-four percent drop at least $300 on ticketed entertainment, 35% spend that much on home subscription services, and 57% spend more than $600 on dining out. 

Data compiled in Pew’s most recent “State of the Media Report” estimates that ad spend on podcasts reached $34 million in 2015, a miniscule figure compared to other forms of advertising. However, a separate study by IAB estimates podcast advertising revenues to be as high as $69 million during the same period, $119 million in 2016 and $220 million by the end of 2017. This equates to 228% growth on a quarterly basis between Q1 2015 and Q4 2016. 

Gittings’ shows aren’t at the top of the pile, but they are impressive. She says “Actual Innocence” averages 75,000 downloads per month, and each episode of “Convicted” has a regular audience of 200,000. One episode had more than 1 million downloads. Her reality is exactly the type of success story many indie content creators visualize for themselves in this new media ecosystem. Yet, many aspiring podcasters will never match what she’s done. 

Each week 1,000 new podcasts debut on iTunes, according to a presentation given by podcast data expert Rob Walch in August at the Podcast Movement conference. Six hundred of them will be abandoned by their creators in six months’ time. Shows that garner 214 downloads per episode within 30 days of release are in the top half of podcast performance. The top 20% of shows will receive just 1,900 downloads per episode. With so many competitors, it’s hard to stand out. And it’s about to get more crowded with major media companies investing in the space like never before.

Take ESPN. The sports media monolith now produces about 30 original podcasts in addition to radio programs that can be shuffled into the podcast space after their initial broadcast. ESPN has dabbled with the format for at least a decade, but it wasn’t until three years ago that the network became serious about establishing a major podcast presence, says Tom Ricks, vice president of audio digital strategy and marketing for ESPN.

“At the end of the day, the radio business is changing overall,” Ricks says. “It’s no secret that the podcasting marketplace is growing. … It’s the place that we needed it to be. And if we were going to be in that space, it was important that we were producing original content that spoke to our fans.”

The network made its biggest move yet earlier this year when it launched “30 For 30” podcasts, an extension of its popular sports documentary series of the same name. Narratives told in the five-episode run include an ill-fated Reebok campaign during the 1992 Summer Olympics that required modification after one of its stars failed to qualify for the games, and the creation of a Yankees Suck t-shirt that came to be emblematic of baseball’s most acrimonious rivalry.

“We’re extremely happy with how well [‘30 For 30’] did,” Ricks says.” We launched the podcast with six sponsors that came onboard, and from a consumption standpoint it certainly met our expectations. We have in excess of 2 million downloads for that first season.”

The network could use the hit. Before it shuttered its blog Grantland, following the departure of editor Bill Simmons in 2015, the site created four podcasts that made it to the top ten in the sports and entertainment category on iTunes. Ricks admits “30 For 30” hasn’t yet replaced that output but is optimistic it can build on a robust debut when the series returns for its second season this fall.

Operating in ESPN’s absence are several other well-funded media companies, some existing solely in the podcast space. Gimlet Media launched in 2013, led by former “This American Life” producer Alex Blumberg and former Slate podcast producer Matt Lieber. The company now produces 11 shows and employs around 80 people. Flipping the script of the standard media funnel, some of its podcasts are being turned into shows. The Gimlet series “Startup,” about the challenges of getting a business off the ground, is now a Zach Braff project with a pilot order from ABC. Another series, “Homecoming,” is being developed into a prestige drama, with negotiations rumored to include Julia Roberts.  

In August, Gimlet announced a $15 million round of venture capital funding led by Stripes Group. The total brings the purported value of the company to $70 million. The move is among the first major investments by private equity firms in the medium. But Gimlet is far from the only network to be flush with monetary possibilities at the moment. Crooked Media, a startup that produces political podcasts, most notably “Pod Save America,” is rumored to have a run rate in the neighborhood of $5 million. And Slate’s “Political Gabfest ” is said to have raked in $1 million last year at $25 CPM.

In many respects, podcasts are the analog to television. Much bandwidth has been consumed charting the world’s gradual shift from broadcast to cable to over-the-top streaming services, which allow viewers to access their favorite shows on demand with limited or no commercial interruptions. This is that, but for audio. 

“The whole world is essentially moving in this direction of on-demand content, and the ability to produce—whether it’s video content or audio content—in that space provides people a lot of flexibility,” Ricks says.

One major difference is that podcasts require no screens and function well as background noise. They do not demand full attention from two physical senses; rather, podcasts give people something more cerebral to contemplate while going about the mundane activities of day-to-day life. 

Mobility is another differentiator. In the Midroll survey, 52% of respondents report listening to podcasts in a car. The Edison Research-Triton Digital number puts that figure at 65%. The growth of Bluetooth and smart car technology allows podcasts to sync up to car stereos, and the ubiquitous smartphone-and-headset combo carried by many consumers at all times ensures podcasts are only ever a few touches away, ready to be heard as soon as push notifications let users know new episodes are available. 

This level of convenience and accessibility is creating large numbers of superfans. Nielson says that 22% of podcast fans are avid listeners, meaning they consider themselves especially interested in a particular genre of podcast. According to Nielsen, these fans represent millions of dollars in consumer purchases every year.

Reaching these fans and others are a unique patchwork of advertisements. According to IAB, 60% of podcast ads are host-read, using talking points supplied by the advertiser, compared to pre-recorded spots, which constitute the remaining 40%. Gittings says she prefers to use host-recorded ads on her shows because they pay more for her personal endorsement. However, because of this explicit vote of confidence, she says she will only accept advertisements from products and companies she personally believes in. This type of native advertising, so taboo in the world of digital and print, fits in quite well in the world of podcasting. Ads can be placed before, after and in the middle of episodes. According to Gittings, it’s the midroll ads which are costliest, since they are the least likely to be skipped.

“My shows are about 45 minutes,” Gittings says. “I generally have three ads per show. The first one has to go within the first 15% [of runtime]. The second one has to go at 45%, and the third one is at 65%.

Until recently, one common hindrance to more money funneling into the world of podcasts was Apple’s chokehold on the medium and the data related to specific shows. That changed this June when the company announced it would start to release more listener metrics to podcast creators and advertisers. Before, advertisers could only assess the success of their commercials by counting the number of promotions redeemed with a special podcast-specific code.

“Typically, [the available data shows] you’ve had this many downloads or listens … and all that really means is somebody accessed that media file URL. But there’s no information on if they actually listen to it on their iPhone or how long they listen to it on your website or anything like that.” says Craig Hewitt, founder of Podcast Motor, a company that helps companies produce branded podcasts. 

Now, updates to Apple’s podcast app will let interested parties know exactly how long an episode is played after being downloaded and what parts of an episode are actually being listened to. 

“iTunes giving this data about when people are actually listening and for how long will be pivotal for advertisers. That visibility will both encourage more savvy and sophisticated advertisers to come into the market and give them more negotiating power with the podcasters,” adds Hewitt.

Apple’s increased transparency appears to have opened the floodgates for advertisers, and, as long as podcasts continue to grow, more will be tempted to invest. How the industry further evolves from this point is anyone’s guess, and there are still fair questions about the format’s lasting legitimacy.

At this point, however, podcasts are more professionalized than ever before, and it’s easy to see them becoming more so. The listener analytics announcement could be part of a trend that inches the industry closer to the world of Facebook and YouTube or, in Gittings’ view, a different breed of media distributor-turned-establishment.

“This is my vision. I don’t have any confirmation of it,” Gittings says, “but within the next few years podcasts are going to be Netflixed. Networks are going to have users subscribe to listen to all the podcasts on a network. For the little people like me in my closet, I think it will be harder to get into a network.”

To find out, we’ll have to stay subscribed. No doubt many in marketing already are.

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Author Bio:

Zach Brooke
Zach Brooke is a staff writer for the AMA’s magazines and e-newsletters. He can be reached at zbrooke@ama.org or on Twitter at @Zach_Brooke.
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