The slow revolution in podcast ad sales
Recently, there has been a tremendous amount of public debate about the role media platforms must play in our society. This debate grows louder in particular around platforms monetizing content through advertising as a core business model. Instead of opining on questions related to content, we wanted to revisit how such advertising is sold against one of the fastest-growing formats: podcasts.
In podcasting, the vast majority of ad spend to date has occurred on a direct basis: e.g. an advertiser interacts directly with the podcast owner to purchase a slot of available inventory on an episode. The process is largely manual and price discovery mechanisms are quite poor. The analytics are equally ‘analog’: an advertiser will be informed of the number of times the episode (not necessarily the ad) was listened to and some broad characteristics of the audience.
This is changing, albeit slowly. While Spotify has captured headlines for acquiring marquee content, the Swedish streamer and several of its audio competitors have also made substantial investments in buying or building the tools to make podcast advertising a much more modern process, through the introduction of dynamic ad insertion, programmatic delivery of ads, and deeper data targeting capabilities. Conceptually, this should help bring demand from advertisers looking for more scale and better analytics. For example, in July 2020, Spotify announced a partnership with the global advertising agency group Omnicom whereby Spotify-controlled podcast inventory will be made available to Omnicom clients for programmatic delivery prior to making it available to other advertisers.
However, this deal was structured as a six-month test with only a $20M spend commitment by Omnicom (vs. $35bn that Omnicom’s media buying group does annually on behalf of its clients). No material mentions or results of the deal have been announced subsequently in over a year. Perhaps this partnership was simply too small to move the needle for either side.
Beyond Spotify-owned or hosted inventory, the company announced it will open access to dynamic ad insertion tools for third-party publishers earlier this year. Theoretically, this move signifies a material opening of the floodgates as advertisers can now target audiences across a highly fragmented (and therefore targeted) field of niche publishers vs. relying on the large, mass-market shows. It remains unclear to what extent this has actually happened, but we are watching closely.
