When Will Dynamic Ad Insertion Take Over Podcasting?
Welcome to The Yard, a blog by Backyard Media that explains the podcast industry and podcast advertising.
Sponsors getting started in the podcasting space inevitably begin to hear one particular term - dynamic ad insertion. The technology has been gaining steam in the podcast industry since early 2016 and appears to be gaining more traction with each passing year. But what exactly is this technology, and what are the implications of its use in the podcast industry, for publishers and advertisers? Let's explore what dynamic ad insertion technology is, how much of the industry is using it, and what sponsors need to know about the technology when it comes to their ad campaigns.
What is dynamic ad insertion?
Traditionally, most ad-reads on podcasts are what we call "baked in". They're static, a part of the podcast episode's audio file along with its content. For example, when a sponsor buys a mid-roll ad, the host records it, the editor inserts it, and the ad runs within the episode. But that ad stays in the audio file indefinitely, no matter if a listener downloads it one day or five years after publication.
A dynamically inserted ad enables publishers to switch out the ad in the audio file on demand, whenever a listener downloads the podcast file. Say that in December of 2017, Sponsor A runs a direct response ad for their website building service. The publisher will run the ad until it achieves a certain number of impressions across all episodes it was placed in, and then the publisher will remove the ad, so that if any other listeners download the file, that podcast will no longer feature an ad from Sponsor A. In January 2018, the publisher then sells the ad slot again for Sponsor B's brand awareness ad, which then runs the same way. As the name suggests, dynamically inserted ads make the ad segments in a podcast dynamic, in that they change over time, and can be inserted and removed by the publisher when necessary.
Dynamic vs. "baked in" ad spots
The benefits here are clear - whenever a listener hears a dynamic ad, it will be fresh and relevant - an important feature for time-dependent campaigns like events or hiring advertisements. On the other hand, a baked-in ad can provide sponsors with new customers long after the podcast episode published, lowering the cost of customer acquisition.
For listeners though, dynamically inserted ads should sound no different from the traditional baked-in podcast ad. Like traditional ads, dynamic ads should be host-read (here's why). The music will fade in, signifying an ad segnment. The host will read the ad script, give a personal anecdote, and then the music will fade out. Either type of ad can be placed into any of the normal ad slots.
It's important that these ads sound the same to listeners. One of the greatest assets of a podcast ad is its seamless integration with the content - remember that listeners feel ads are part of the show. While host-read traditional ads usually recorded separately from the show's content, publishers and sponsors need to make sure that dynamic insertion ads sound the same, in their sound and tone, as the rest of the show. One concern among some actors in the industry is that with the rise of dynamic ads, ads overall will be of a lower quality, and that listeners will feel that they're out of place. As Nick Quah of the Hot Pod Newsletter notes, this anxiety of the effect of dynamic ads in podcasting "remains top-of-mind among many emotionally invested the space."
When will dynamically inserted ads become widespread?
In many ways, dynamic ad insertion is already here. Some networks, like NPR, have utilized dynamic ad insertion for their podcast ads for years - NPR has dynamically inserted pre-roll ads into its podcasts since at least 2008. The hit show Serial, from WBEZ in Chicago, used baked-in ads for its first season. In its second season, it switched to all dynamic ads, without any negative effects on listenership or ad revenue.
The IAB's study from June 2017 (which we discussed in our last blog post) showed that dynamically inserted ads comprised 56% of all ad spending in FY 2016. That study's data came from the 20 largest podcast publishers, so two things are happening in that number. First, some of the largest podcast advertisers are switching to this new technology. Second, ad inventory with dynamic insertion is inherently larger - after all, one podcast ad slot in one episode can be sold to multiple sponsors over a period of time for different campaigns. Thus dynamic insertion can take an outsized share of ad revenue compared to traditional ads.
Why is dynamic ad insertion important for sponsors?
Not every podcast publisher has adopted dynamic podcast ads, but as the technology matures and proves its value, more are sure to do so. We see this technology as a way of giving flexibility to sponsors in how they craft their ad campaigns. Some sponsors will want to keep their ad indefinitely in a podcast with a traditional ad spot and gain customers over a longer period of time. Others will see dynamically inserted ads as a way to gain impressions during a time-dependent ad campaign. Sarah van Mosel of Market Enginuity summarizes this view well: "Dynamic ad insertion is one end of the evolving podcast ad spectrum, with branded content on the other extreme and baked-in ads in the middle. As a marketer, I’d rather have more options, than less."
But as this technology becomes more widespread, sponsors need to be aware of the technology as they plan their campaigns. One aspect they should consider is that dynamically inserted ads differ in their pricing. We spoke in a previous post about how ads are priced. When sponsors choose dynamically inserted ads, they will typically pay per 1,000 downloads of the episodes the ad appeared on. For instance, if a sponsor did a direct response ad across the most recent five episodes of Podcast X, then the download numbers of those specific episodes would dictate the final cost.
And that's all we have for you on dynamic ad insertion! As the technology makes more news and progresses, we will be sure to update sponsor on what they need to know about this important segment of podcast advertising.
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