Podcast Advertising Will Be Worth More Than $600M by 2020
Welcome to The Yard, a blog by Backyard Media that explains the podcast industry and podcast advertising.
We've got fresh data on the state of podcast advertising. Every year, the Interactive Advertising Bureau (IAB) surveys the biggest podcast studios and gathers data about how much the industry is worth, who's buying podcast ads, and how they're structuring their ad campaigns. We spoke previously about the state of podcast advertising. What are the top line numbers from the study's 2017 data? Below, we dive into the four main takeaways from this year's study that sponsors need to know before jumping into their next ad buy.
2017 saw a larger-than-expected rise in podcast advertising dollars
First, the most relevant numbers from our previous post about IAB's survey of 2016:
In reality, IAB says that 2017 saw an even bigger top-line number: $313.9 million in ad revenue, growing 86% since FY2016.
There are really two sets of numbers here, both of which show huge growth. There's the self-reported data and then the market estimate. IAB surveys the top 19 podcast studios and companies selling podcast ads. It then draws the market-wide figure from their self-reported earnings. Those 19 companies together reported $257.4 million in ad revenue. Looking at the quote above, that's a 17% increase from what IAB expected they would earn in FY2017, and represents a massive 117% increase from their FY2016 actual revenues.
The real story behind podcast advertising's higher-than-expected revenue increase is the average rate of growth, which has picked up speed since Q4 2016. Take a look at the chart below:
It makes sense that the IAB survey for 2016 would have undershot 2017's final revenue numbers. The Compound Quarterly Growth Rate (CQGR) from the end of 2016 until the end of 2017 is noticeably higher than any previous IAB data.
What are the implications for podcast sponsors? 2017 proves that podcast advertising is no longer in its infancy, but instead is an established digital channel for reaching new customers. Its growth is undoubtedly tied to its unique value as a medium, including the host-listener relationship and the fact that audiences view podcast ads as part of the content they're consuming.
Because of the 2017 numbers, IAB has revised its projections for 2018 and 2020 upwards
Given 2017's higher growth rate, the survey has upped the projections for the 19 podcast companies it surveyed and by extension the entire market. IAB says that the value of the podcast advertising market in 2018 will be $402 million. What's more, the research group says that podcast advertising will total $659 million by 2020:
Recall that we discussed previously a Bridge Ratings survey which estimated the podcast advertising market would be worth $500 million by 2020. If the IAB is to be believed (and we generally find their methodology to be more sound than Bridge Rating's), the industry should hit that number somewhere in 2019.
What are the implications for podcast sponsors? Growth, growth, growth. For companies considering getting into podcast advertising, now's the best time. The market will continue to grow, which means more sponsor dollars vying for podcast ad inventory. We've seen from other data that listeners are hearing a manageable number of podcast ads (under ten per month). Sponsors that run memorable podcast ad campaigns now, while listeners aren't hearing that many ads, will see the highest ROI.
Host-read ads remain dominant in the industry, but sponsors are diversifying their ad campaigns
We've mentioned over and over that host-read ads are podcasts' bread and butter. Remember that these are ad spots that are read by the podcast host, while a minority of ads feature another person, either a producer or "announcer", reading the ad copy.
2017 was no different, as host-read ads were 66.9% of all sold podcast ads. The IAB didn't ask this question in 2016, but other surveys we've seen show that host-read ads have been between 50 and 70% of sold ads.
(Another interesting point from this slide is that supplied ads have made their debut. These are produced by a team separate from the podcast's production team, like a sponsor's marketing department.)
One big takeaway from this year's study is the rapid diversification of podcast ad campaigns. For many years, direct response ads have been a super-majority of all ad campaigns on podcasts. In 2017, they still represented most campaigns out there, but sponsors are diversifying to brand awareness ads and branded content campaigns:
Branded content, or podcasts that are entirely sponsored by one company from conception to distribution, have expanded dramatically. Many industry players believe that branded content represents the frontier of podcast advertising.
This campaign type represents the most creative option for both sponsors looking to get their message out and podcasters wanting to stretch their creative muscle with the content they produce. Evidence suggests that listeners do not see branded content podcasts as longform advertisements, and that these shows do wonders for brand awareness and sentiment.
What are the implications for podcast sponsors? Existing and potential podcast sponsors should recognize that there are many campaign options for their ad campaign beyond the simple (but effective) direct response ad. Companies are seeing the value in branded content and brand awareness ads. Marketers should consider what type of ad buy they want to make, and have discussions with podcasts they're going to work with about how they can vary their campaign - the more unique a podcast ad campaign is, the more it will stand out for listeners.
Sponsors are getting into podcast advertising for the long haul
One final point that sponsors need is the type of ad buys that are the norm in the podcast industry. A new question the IAB asked podcast studios this year was the type of buys they saw in FY2017. It turns out that two-thirds of ad buys feature podcast sponsors planning out their ad campaigns past the next quarter.
This data aligns with what we see at Backyard Media: marketing departments are looking beyond one-off ad buys and instead thinking about how podcast advertising will integrate with their marketing efforts for the next quarter, two quarters, or entire year. This data point is also a testament to sponsors' confidence in the value of extended podcast ad campaigns when it comes to ROI (whether that's new customers, brand lift, or brand awareness).
What are the implications for podcast sponsors? Podcast sponsors should know that over 70% of ad buys are quarterly or above. This also means that ad inventory for popular podcasts may be tied up for longer stretches of time and sponsors will need to plan accordingly.
Want to read the full IAB report for 2017? You can download it on their website.
Ready to join thousands of other companies who are advertising on podcasts? Backyard Media's podcast marketplace is the perfect place to find and buy podcast ads. Contact us here and start hearing your ads on Backyard Media's podcast partners today.
Want to read more about the proven value of podcast ads? Check out these blog posts:
- Why Podcast Advertising Revenue Will Hit $500 Million in 2020
- Here's Why Your Podcast Ad Should Sound Different From Your Other Ads
- Here's How Fast the Podcast Industry is Growing
- What Do We Know about Podcast Listeners in 2018?
- What Did the Podcast Industry Learn in 2017?
Backyard Media is a marketplace for podcast advertising. We connect content creators of all shapes and sizes with awesome sponsors, providing them with the resources they need to do what they do best. Everyone wins.