Selling your Soul in Audio
Can Podcasters Break the Standard Mold on how Media is Monetized?
This is a slightly edited republish of the Selling your Soul in Audio which appears in movementDash the Collection
I had the opportunity to ask some questions to two of the most popular podcasters in the biz — Ira Glass from This American Life and Alex Blumberg from Gimlet Media. For this, my sweet-sweet moment in the sun, I asked about the current life-blood of audio, advertising.
The last episode in the second season of Gimlet’s StartUp Podcast was a bonus track. Instead of closing the season with Lisa Chow’s final episode on Dating Ring, the new women-owned startup the show had been following, a new piece of intimate business knowledge was dropped about Gimlet’s own startup journey. The bonus track made us privy to the fact that the hosts of Reply All, one of Gimlet’s shows, had a problem and that problem was advertising.
Here is their issue:
Gimlet received an awesome sponsorship offer from Microsoft: compensation for in-show audio ads. Reply All’s co-hosts, Alex Goldman and PJ Vogt, recorded a documentary style advertisement in which Vogt and Goldman captured their first exposure to Microsoft’s Outlook app and interviewed some co-workers that were big fans of the application. They then closed with endorsements of the product: “Do you hear that? If you want to be an early adopter like Matt Lieber and a very prominent unnamed tech journalist and me and Pj, now is the time to make the leap; download the app for free for iOS or Android.”
The advertisement, like many of Gimlet’s advertisements, mimicked the style of Gimlet’s shows, exploratory and humanizing. But after all that effort PJ and Alex felt dirty. They didn’t feel comfortable with the advertisement they created. It felt false or maybe like too much of a personal endorsement for a product they had never extensively used and that brought up a couple questions:
1. Can a podcast host create or even just read an ad without seeming to give their endorsement?
2. Can a show host remain objective if they are accepting ad money?
The second question is an age-old tale that journalists run into again and again. Accepting money from an external party makes you somewhat indebted to the person paying you. Saying something negative about Coca-Cola just after you say “This show is sponsored by Coca-Cola” will probably make Coca-Cola reconsider giving you money the next time around. That isn’t good for business.
The first question is a slightly newer conundrum that people in podcasting and talk radio face. On many audio platforms the show host reads the advertisement or in Gimlet’s case, has a real experience with the product and the people that make it. That makes the ad seem like a personal endorsement, right?
There is a lot of gray space with this issue but all I could think when I listened to StartUps bonus episode was, this shouldn’t be a problem. Don’t get me wrong, falsely supporting a product is a problem but it is only a problem if you have to take support from an advertiser or a product that you don’t fully support. On top of that, supporting an advertiser’s product is only a problem when the product you are creating relies on being supported by advertisement. With these two facts, the problem Pj and Alex were having might be more about business model than an murky ethical dilemma.
Tim Ferriss of the Tim Ferriss Show Podcast only accepts advertisements from companies he really supports. He goes so far as to say that he has hit a ceiling on the amount of money he can make on each episode. Ferriss will only run two to three ads per show. Because he only takes sponsorships from a select few companies and only runs two to three ads each episode, he can only make so much in a year. That ceiling might not be a bad thing. By placing a premium on his ad spots, Ferriss drives up demand, increasing the potential cost per thousand downloads (CPM), and maintains the credibility of his brand.
As far as supporting podcasting with money that doesn’t come from ads, just look at HBO. HBO is the quintessential media innovator. Their business model is completely subscription based: no ads, just high quality content that pushes boundaries without having to worry about what their advertisers think of the content they produce.
Network CEO’s like Blumberg have been known to say that podcasting enables the creation of shows that would never be allowed on radio. That sounds like podcasting solidly leans in a more radical, HBO like, direction.
If Podcasting Networks emulate HBO’s model, individual podcasters could subsidize their business with ads from companies they really support; diversifying their income streams even more than HBO does itself. By my rough calculation this model makes ends meet even in the newer podcasting space:
10% — the standard number of users that opt into premium services.
200,000 listeners — a healthy number of weekly listens/downloads for a show on a network
10 shows — the average number of shows on a podcasting network
$25 — the average CPM podcasters pull per show (note: some networks like Gimlet pull $100 CPMs) [2015]
20 employees — the number of ‘employees’: podcasters, producers, and managers in a newer network like Gimlet which has 3 shows
$5.99 per month — a very modest subscription fee
If we consider what one show could make from advertising we could get the following: $5,000 per episode if all of their listeners downloaded their show. If they make one show per week for 8 months out of the 12 that amounts to $160,000 per year. Scaling that up for 10 shows, that is $1.6 million per year in ad revenue. That would mean about $30,000 per person if a 10 show network has 60 employees that they paid equally.
On the other hand if we consider how much the network could make from a subscription model we get $228,000 per month (10% of their listenership paying $5.99. With 10 shows each having 200k downloads maybe 10% of each show’s listeners are unique/aren’t listeners of the other shows who have already paid the subscription fee. That makes 180k repeat listeners and 200k non-overlapping = 380k unique listeners). That means if each show airs one show per week they would consider themselves to make the network $5,700 per episode ($228k/40 episodes a month).
That means the network makes $1.8 million per year; 200 thousand dollars more. Once some truly host supported ads are mixed in you get a dangerously more lucrative situation.
The Podcasting Industry is young. Industry-wide innovation could happen quickly with the right tools.
Maybe this is an ideal to work towards. What do you think?
This article was written by Adwoa Boakye, founder of movementDash makers of RecRoom, a platform for running Audio Surveys. To share your thoughts on the analysis talk about it here!
