Podcast Monetization Just Got Interesting
A lot can change in a week.
First, a disclaimer: I’m an investor at betaworks ventures where we’ve invested in over a dozen companies focused on voice/audio. I mention several of them below, including Anchor, Gimlet, and Breaker.
Last week marked the beginning of at least two distinct experiments for monetizing podcasts: deeper integration of the patronage model and alternative pricing models.
Anchor launched Listener Support making it easy for listeners to donate to the podcasts they love using Apple Pay, directly from web links or in the Anchor app. What could potentially supercharge this model is that Marco Arment tweeted stating the next version of overcast will turn these types of donation links into big green buttons in the Overcast app, encouraging listeners to support the podcast. The same week, Patreon also announced its acquisition of Memberful. Memberful helps creators sell membership to listeners and already includes Gimlet Media as a customer.
Most consumer software developers are obsessed with the idea of “friction” (or lack thereof). Reducing the number of clicks (on the web) or taps (on the phone) to complete a task increases the likelihood that it will happen. Right now the process for contributing to a podcast is to hear the call to action, click or tap to the sponsorship page (hopefully it’s in the show notes), then enter your information and a credit card.
That credit card link is a huge potential area for improvement, which Anchor and Overcast are addressing head-on. We see the effects of this type of change in online shopping: when shopping cart software Shopify added the ability to include Apple Pay, they saw a 2x conversion rate on mobile. Moovweb saw a 14% lower conversion rate using Paypal versus a credit card. I’ve put these two stats together very unscientifically here:
Alternative Pricing Models
Meanwhile, Breaker is taking an entirely different approach. Last week, they launched Breaker Upstream, offering podcasters a number of ways to charge for exclusive content from subscription to paying for specific episodes. This is interesting because it creates an opportunity on a different axis. Just as The Daily experimented with length and frequency of podcast (shorter & daily vs longer and weekly), there are now opportunities to experiment with which episodes are free versus paid.
For example, a podcaster might offer sets of episodes where part 1 is free and part 2 is paid. Or the podcaster could offer the first 5 episodes free and charge for the rest. Podcasters should start experimenting with these.
Last week was just the latest in a series of interesting moves made by various companies to position themselves in the audio ecosystem. In May, Spotify signed Amy Schumer to a reported $1m contract for exclusive rights to her podcast content. In June, Creative Artists Agency (CAA) signed a podcast agent. Prior to that, companies such as Gimlet Media have acquired individual podcasts (e.g., The Pitch, Science Vs….and yes I‘m aware that linking to Reddit as a source is not…scientific? But interesting that they came up first in google searches. People talk a lot about podcasts on Reddit).
The difference this past week is that it marks a potential shift in the underlying structure of podcast monetization. It opens up a new opportunity for podcasters to monetize in a way that is native to the medium of podcasting.
For the past couple of years, people (including me) have pointed to the opportunity of the audio category. Companies such as Gimlet Media have been able to build large businesses on the content side. In 2017, podcast revenues grew 86% to $314 million, and PwC / IAB research projects growth to hit $659m by 2020. However there is a low supply of high quality podcasts that reach massive audiences, so advertiser revenue is being distributed to a relative few (and resulting CPMs are high because of that limited supply).
So the question remains, how can smaller podcasts create sustainable businesses? These new monetization experiments are critical to finding what people are willing to pay for (and what they aren’t willing to pay for) and could provide an important puzzle piece for the ecosystem. I’m excited to see new content, and especially new monetization experiments, that will help the audio medium to become sustainable not just for large networks, but for individual broadcasters.