Radiolab hosts Jad Abumrad and Robert Krulwich crafting another masterpiece. Photo from KERA News.

Finding the Money in Podcasts: An Industry Dilemma

Podcasters are leaving a ton of money on the table with its current advertising strategy. In episode 17 of the Startup podcast Alex Blumberg talks about the business of making podcast ads, where ads in the Startup podcast are created with more TLC. In the show, host Lisa Chow curates stories with sponsors like Audible and Squarespace, interviews users in the real world, and creates a story-driven narrative of the service from discovery to solution.

Native ads on Facebook Newsfeed and Google Search was proven out for better part of the 2010’s, where the ad format has improved overall performance for advertisers through better conversion and less intrusive UX. So it’s not surprising that radio/podcasts are taking a stab at their version of the native ad format with the same hypothesis: less intrusive for listeners and higher conversion for advertisers.

One minor detail: 30s skip button. The moment I hear the dreaded “I’m an Ad” music overlay, I furiously tap the 30s skip button precisely 4 times to get back to the content. No amount of TLC can overcome an impatient listener.

Tired of waiting? Your user-friend skip button is here to save you from long ads.

The Challenges with Ads on Podcasts

Ultimately, there hasn’t been a ton of adoption of the native format on podcasts simply because of the higher overhead and lower ROI. In addition, podcast ads also face a handful of unique challenges when comparing to ads on mobile, web, and video. Monetization is seemingly a distant dream, as most podcasts are nonprofits that run on quarterly fundraising events.

  • It’s hard to tell a great story in under 30 seconds. Humans are inherent visual creatures (remember silent movies?) — we interact daily with others through body language and visual cues. When limited to only the audio format in the podcast ads space, marketers are forced to craft extremely action-oriented ads. Imagine a marketer trying to run a Windex commercial on radio — how does one convey the brightness in the windows without saying it? As marketing analytics permeate throughout the industry, marketers are feeling the pressure to get measurable impact. Radio ads, in the meantime, continues its evolution to a full-flight audio coupon book, i.e. “use promo code STARTUP to get x months free.”
  • Higher user intent with podcast consumption. The direction that Alex Blumberg’s taken is to leverage Gimlet Media’s expertise in storytelling and tell a better advertisement story. With this strategy, ad length grew from 30 seconds to 2 minutes (or with Reid Hoffman’s Master of Scale podcast — chop them up into 4 segments and unveil throughout the episode). When contrasting this against web/mobile native ads, where content is less in-your-face and easier to tune-out, 2 minute podcast ads are extremely disruptive to the listener experience. I can’t just go somewhere else and come back. As a listener, I’m forced to make the decision to either skip or sit through a painfully long ad.
  • Production cost of high-quality audio ads. While I do appreciate the story of Squarespace changing small business owners’ lives, this story does grow stale quickly. Because these ads are specifically designed by the host podcast, ad creation becomes a to-do for podcast producers — which introduces more overhead for the already budget-constrained organizations. An extra 6 hours of edit time for the upcoming episode, or to improve the overall story? Take your pick.
FB native ads have been around for better part of the decade, and has proven out to be a worthwhile investment for Facebook, Google, and many others.
  • eCPM doesn’t reflect true value of ads. As an advertiser, I’m less inclined to bid the same amount per impression on podcasts versus other channels because I 1) ultimately don’t know how effective the podcasts are at reaching its audience (total impressions), and 2) it’s difficult to gauge true performance of advertising campaigns (conversion). This is because iTunes and other podcast distribution channels often only provide opaque metrics like downloads and listeners — where web and mobile channels have moved on to more robust tracking like impressions, CTR, and conversion. To make matters worse, there’s little incentive on the distribution side to provide advanced metrics because the distributors (iTunes, Stitcher) don’t get a cut of revenue (though that’s changing as iTunes will soon be sharing advanced podcast analytics). As if that wasn’t enough, podcast distributors across the board have introduced the 30s skip button to improve listener retention. Goodbye monetization.

Limiting Distribution to Grow: Catch-22

If podcast distributors won’t play ball and are effectively the bottleneck to your topline growth, what do you do if you’re WNYC, NPR, or This American Life? Simple: you take your podcast off of iTunes/Google Play/Stitcher/Spotify and get the ball back on your court.

According to Podtrac Industry Rankings, top publisher NPR has an MAU of 12M+ listeners with upwards of 93M+ streams & downloads per month. Assuming each download has 3 ad slots, and each ad pays $5 eCPM, NPR would be making ~$1.4M/month from podcast advertisements from its 40 active shows. Not bad for public radio.

Estimated monthly revenue from NPR via podcasts, data from Podtrac for July, 2017.

That said, average revenue per listener per month is a measly $0.038 (gasp)! If NPR is able to convert 5% of its listener base to pay $1/mo for ads-free, supported by 95% advertisement on its own NPR platform app, it’d be looking at at least ~$1.95M/month, or +38% lift in revenue. That’s not accounting for any lifts in ads eCPM as they’d be able to 1) take away the 30s skip button from its own platform, 2) upsell the premium-ness of the ad slots, 3) provide better than ever user demographics for targeting, and 4) gauge true performance metrics from slots. Such model has worked for New York Times and Spotify — why not podcasts? NPR is in the best position to do this as it has the most clout in the industry, and others would likely follow suit if the biggest player were standing up to the distributors.

Total downloads for top 10 podcasts per Podtrac — with NPR way ahead of the pack and coming in

Even better, by taking its podcasts off of iTunes, NPR would be able to do better cross-promotion across its podcast network in addition to providing better podcast discovery. Control the platform, control the experience, and increase overall network engagement.

While such drastic shift may be too bold for public radio — and frankly, too risky as it may lead to lower listenership — it might be the right strategy for Gimlet Media, the makers of The Startup Podcast. Let’s face it, while $1.4M/month revenue is a nice figure to strive for, accounting for the operating cost of running 40 shows makes the podcasting business a high-margin, low ROI business (40 shows X 3 people/show X $10k/mo/person = $1.2M/month). Certainly not a business that investors like Chris Sacca would be looking to invest in.


Good stories take a lot of blood, sweat, and tears to produce. As consumers are getting accustomed to paying for premium content in apps and in video, podcasts — especially those of high-production value — should take a second look in the mirror and understand that it’s time to get the consumers on board to truly support them.

I couldn’t wait to tune into S-Town when it came out. Especially with the rave reviews, I could have easily been a $10 consumer for the podcast. Instead, I listened to a total of 20 ads and derived $0.1 of value for the producers. This post is for you, podcast producers — stop leaving money on the table.


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