Podcasts and the power of advertising when people actually pay attention

I came across a mind-blowing stat that the average CPM (cost per mile, aka how much an advertiser needs to pay to get in front of 1,000 people) for podcast ads is $25, with some shows approaching $100. That is insanely high compared to CPMs in other forms of online media like YouTube (I’ve seen $2 to $15) or banner ads ($1-$6), and much higher than traditional media like TV, radio, or out-of-home.

Podcast listenership is still relatively low compared to other major forms of media, but advertisers are flocking as they see how well ads have worked across the medium. While this may not be sustainable in the long-term it’s impressive how much podcasts can charge for ad placement, especially given how difficult it is to track listenership after an episode is downloaded onto a device.

Josh and Chuck, hosts of “Stuff You Should Know,” whose insanely high IQs are only matched by their CPMs.

So why exactly are brands willing to pay so much for podcast ads?

1) Listeners trust their hosts.

The vast majority of podcast ads are read directly by the hosts of the show, often in a fun and engaging way. Anyone that’s a podcast listener knows the personal connection they feel with the hosts of the shows they most frequently listen to. Seeing Josh and Chuck from “Stuff You Should Know” live was a truly exhilarating experience, as I feel a sense of friendship with them after listening to their banter over the past several years. I imagine this Is the same connection that older generations felt with TV personalities like Walter Cronkite and Jonny Carson, the latter of whomdirectly promoted products on-air in a way that would not fly in our current day and age.

2) Advertisers know their demo.

The smaller the audience, the easier it is to cast an accurate net. Podcast listeners are young, well-educated, and entrepreneurial, and it’s no surprise that the top advertisers are digital offerings likeSquarespace, Stamps.com, and Mailchimp. With most people listening on mobile, it makes it quick and easy to search for the product being mentioned.

3) Listeners are fully engaged.

Unlike TV, you can’t half pay attention to a podcast. Listeners are tuning in by themselves while walking around, in their car, or going to sleep, and they won’t quickly switch the channel when an ad comes on.

4) Advertisers can directly see the ROI.

About 60% to 80% of podcast ads are direct response, meaning that they have a discount code or unique URL that makes it easy for companies to track the performance of their ads and how they lead to direct sales. While Mailchimp is probably not seeing ROI like it did with Serial, ads are probably performing well given the number of repeat customers. While advertisers can track ads from online banners it becomes very difficult to do in our now multi-device world, while the podcast code read aloud can be tracked on any phone or computer.

5) Millennials are okay being sold to.

This is a key and probably misunderstood concept, as old school publishers complain about the prevalence of adblockers and how it’s forcing them to put up paywalls online. Our generation understands that ads pay the bills, we just don’t want our entertainment experience being cut off for elongated periods of time, nor do we like feeling like we’re being tricked into buying anything. We can’t stand 5 full minutes of commercials in the middle of watching an NBA game and we find in-movie product placements cheesy and deceptive (unless of course it’s from Ricky Bobby). I’m okay knowing The Rock Is promoting Under Armour and intentionally putting the brand in his Instagram posts because he does it an a transparent and fun way, and it’s very clear he actually uses their products and enjoys doing so. If you’re going to sell us something, just be straightforward and sell it!

Podcasts are an incredible medium for storytelling, and the high cost of advertising is a testament to the engagement and loyalty of their listeners. I’m happy to buy a pair of MeUndies or renew my Squarespace subscription to keep my favorite podcasters in business, let’s just hope advertisers don’t oversaturate the podcast landscape like they have in every medium before. Sigh.

Disclaimer: While I’m a podcast addict, I didn’t even like season 1 of Serial and will gladly debate that point. What I’m listening to now: a16z, Song Exploder, The Bill Simmons Podcast, Hot Takedown, Presidential, FiveThirtyEight Elections, Reply All, and Planet Money. Sooo yeah, I’ve heard about Mailchimp a few times by now.

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