The Future of Podcasting: How Do Podcasts Make Money?

Welcome back to our five-part series on podcasting! Make sure to check out parts one, two, and three, if you haven’t already.

This week, we’ll be exploring the question of how podcasts make money. Similar to YouTube creators, most individual podcasters start making podcasts as a hobby, and the most successful ones are able to make it a full-time career.

One notable example is Bob Ruff, a former fire chief and arson investigator who launched a Serial fan podcast in 2015 called Serial Dynasty. Almost 150 episodes later, Ruff is now a full time podcaster. After renaming his podcast Truth & Justice, he moved beyond the Adnan Syed case to investigate other potential wrongful convictions, and his investigations are largely driven by weekly questions and suggestions from listeners on a live phone line.

Bob Ruff, host of Truth and Justice, plays up his past as a fire chief and arson investigator in his investigatory podcast, which started off as a Serial fan show.

Since leaving his job as a fireman, Ruff has earned an income primarily through ad partnerships as well as listener donations via Patreon, where he earns almost $1,300 monthly. Ruff’s experience is somewhat atypical, as most podcasters have a smaller (and less involved) fan base. However, a number of podcast hosts have been able to monetize their content through one of the following methods:

• Advertising and sponsorship — podcast ads have traditionally been “direct response,” where the host talks about a product and gives a discount code. Brands are also beginning to sponsor entire episodes or series, as listeners can easily “fast forward” through individual ad breaks.

Season Two of Malcolm Gladwell’s podcast Revisionist History is sponsored by Chanel. Photo courtesy of Twitter user Jay Willis.

• Membership/subscription models — some podcasters charge listeners for early access to content, ad-free listening, or exclusive bonus episodes. Apple Podcasts does not yet enable this, which has led to some creators to turn to iTunes or third-party sites to sell their content.
• Direct support — some listeners donate directly to podcast producers, typically through websites like Patreon or Kickstarter. True crime series Last Podcast on the Left has been particularly successful with this model, making nearly $25k per month from ~4,300 supporters on Patreon.
• Foundation support — foundations with media-based missions (e.g. The Knight Foundation) will give grants to select podcasts.
• Live events — much like bands or live comedians, podcast networks or individual creators will host live events and charge for tickets, merchandise, and “behind the scenes” access.

My Favorite Murder, a popular true crime podcast, has been on tour the past few months, with sold-out venues across the United States. Photo courtesy of Whitney Ehnert on Twitter.

The first two monetization strategies (advertising & sponsorships and memberships/subscription) are by far the most common, and will be the focus of this post.

Advertising

According to a 2017 survey from the Interactive Advertising Bureau (IAB) and PWC, ~$220M will be spent on podcast advertising in 2017, up 85% from the $119M spent in 2016 (and more than triple the $69M spent in 2015).

Courtesy of the 2017 IAB Podcast Ad Revenue Study.

What do podcast ads sound like? In the past, the majority of spend was concentrated on ads recorded directly within the podcast content — regardless of when or where you listened to the podcast, you would hear the same ad. Now, dynamically inserted ads are becoming more popular, and accounted for 56% of spend in 2016. Dynamic insertion allows podcasters to switch ads into and out of different slots, even after initial publication.

A Serial ad featuring humorous mispronunciations of Mailchimp became extremely popular.

Many podcast ads are delivered by the podcast host(s), who read the ad copy and incorporate their own stories, leading to funny and memorable endorsements.

“I don’t think you will see many people wearing ‘Cosby’ sweaters anymore — but if you do have a ‘Cosby’ sweater, maybe you should trade it in for something from LeTote.” — Kevin Flynn, co-host of the podcast Crime Writers On.

According to the IAB, 60% of podcast ad revenue comes from host-read ads. Podcasts aren’t regulated by the FCC, which means that content creators aren’t required to abide by the tricky rules surrounding native ads.

Branded content is another emerging revenue source. According to IAB, brand awareness ads and other branded content accounted for 27% of podcast ad spend in 2016, up from 17% in 2015. Podcast network Gimlet Media is particularly well known for this— Gimlet’s team has collaborated with eBay, Virgin Atlantic, and Microsoft, among others, to produce custom shows.

eBay, Tinder, and Virgin Atlantic have all partnered with Gimlet Media to produce branded podcasts.

How much do podcast ads cost? It’s entirely dependent on the popularity of the show, but rates fall between $15 and $30 per 1,000 listens (or up to $40 for top-tier shows), which is 5x the cost of a traditional radio ad. The price of branded content also varies — for the most popular podcasts, sponsoring an entire show is typically at least a six figure deal, while sponsoring a single episode can cost hundreds or even thousands of dollars per minute.

Are podcast ads effective? The jury is still out, but early indications are positive. Midroll Media’s survey of nearly 170,000 podcast listeners found that 61% of listeners report buying a product they heard about on a podcast ad. Slate, which partnered with Prudential on a branded podcast, found that the podcast was more than twice as successful as banner ads at lifting brand awareness (by 14 percentage points) and ad recall (by 21 percentage points).

A FiveThirtyEight analysis of podcast advertising in February 2015 identified the differences in the types of brands that advertise on podcasts versus radio. Only 5% of podcast ads were from“big-name brand advertisers” — most were startups focused on digital-oriented products or services.

Outstanding Concerns

Though podcast advertising is growing quickly, ad spend on podcasts still falls significantly below TV advertising ($67B in 2016) and other digital ads ($70B in 2016). Why aren’t more advertisers investing in podcasts?

• Limited reach. While growing, the podcast listener base is still relatively small. In 2016, only 15% of Americans listened to podcasts on a weekly basis, according to Edison Research.
• Niche demographic. Podcasts are still considered a somewhat esoteric form of content that primarily appeal to middle/upper class white listeners. This perception is beginning to change, but advertisers targeting a diverse audience may be more wary to try podcasts.

“When it was only nerds who were listening to podcasts, [advertising] was all app developers and web-hosting companies…as nerd culture has gone from niche to increasingly mainstream, that’s benefited us.” — Lex Friedman, Chief Revenue Officer at Midroll Media

• Lack of quality content. In the past, many podcasts were produced by amateurs recording in a closet or basement. Thanks to established media companies entering the space, as well as the birth of podcast networks, there is now a wealth of quality shows for advertisers to target.
• Limited analytics. Advertisers have historically been unable to access measurements of performance, as Apple provides only the number of downloads for a show. Apple recently announced it will start providing more detailed listening analytics, which could increase ad spend.

Membership/Subscription Models

In the past two years, several podcast networks and individual producers have experimented with charging listeners to access exclusive content or early, ad-free listening. A few examples:

• Podcast listening app Acast launched Acast+ in May 2016, a platform that allows listeners to buy premium content directly from podcast hosts. Most shows charge $2.99-$6.99 for a “monthly pass” that provides ad-free listening, early access, and exclusive content.
• Audible added podcast subscriptions last April, and there are currently 163 podcasts on the platform, ranging in price from $3.95 to $6.95 per month. Several Audible original shows, such as Ponzi Supernova, Where Should we Begin?, and 100:1 are now available free on Apple Podcasts.

Audible’s original series Ponzi Supernova focuses on the $65B Ponzi scheme of Bernie Madoff, who was interviewed at length on the podcast. The series was originally released on Audible’s plaftorm but eventually offered for free via Apple Podcasts.

• Midroll Media, a podcast network, launched Howl in August 2015. The app allows listeners to access the network’s entire library of content ad-free and get access to 150+ hours of original content for $4.99 per month.
• Stitcher, another podcast listening app, charges $4.99 per month for Stitcher Premium, which provides ad-free listening, 40 original shows, and early access to popular podcasts.
• Gimlet Media, an original content producer, offers a $5/month subscription for early access to episodes and membership in a Slack group with the content creators.

None of these companies publicly release metrics on how many people pay for premium content. Podcast experts have long debated whether listeners will pay for content that is typically available for free. Unlike TV or music, podcasts have always been free — why would listeners suddenly agree to pay?

On June 12, 2017, a true crime podcast demonstrated that a substantial number of listeners do have some willingness to pay, as True Crime Garage released a bonus episode on iTunes for $1.99. To the surprise (and confusion) of many, this episode quickly rose to the #1 album on the iTunes charts, beating out both Katy Perry’s new album and the Dear Evan Hansen soundtrack (which had just won a Tony for Best Musical).

Whether other podcasts see as much success with paid content is yet to be seen, but this is a promising sign that listeners are willing to pay for quality content.

Thanks for reading this week’s article! Check in next week for a summary of my thoughts on the podcasting space, and the biggest outstanding questions facing the podcast industry.