What's Behind the Podcasting Frenzy (Hint: It's not Too Late to Create)

There’s no question, podcasting is hot right now. Until recently, no platform moved aggressively to dominate the medium in the way YouTube dominates digital video. That allowed innovators and entrepreneurs to flourish in what’s turned out to be a profitable segment of digital media.

Now, the race for platform dominance has begun, resulting in a flurry of mergers and acquisitions. In recent news:

• Hollywood veterans Jason Bateman, Will Arnett, and Sean Hayes are signing a deal for at least $60 million with Amazon for Smartless, the podcast they created in July 2020.

• Meanwhile, Spotify will reportedly pay $60 million over three years for exclusive rights to the sex-positive podcast, Call Her Daddy.

• At the top of the heap so far: Spotify’s $100-million pact with Joe Rogan for an exclusive license to distribute the Joe Rogan Experience, signed in 2020.

These payouts for individual podcasts follow blockbuster deals since 2019 for podcast studios, including:

• Amazon’s $300 million acquisition of Wondery in December 2020; and

• Spotify’s purchases of Gimlet ($200 million), The Ringer (another $200 million) and Parcast ($56 million).

Why is podcasting succeeding where other digital media fell flat? Let’s start with who’s listening.

A Desirable Audience

Since the podcast Serial kicked off the current audio boom in 2014, the audience of monthly podcast listeners has grown 170%, according to Edison Research and Triton Digital. It’s an audience that’s extremely appealing to advertisers and any media company looking to the future: the biggest fans are millennials – the average listener is 38 – and many live in households with incomes well above the national average, according to Nielsen.

At the same time, the podcast audience is increasingly reflective of the diversity of the U.S. population as a whole. Hispanic listeners make up the fastest growing demographic.

Effective Advertising

For brands, advertising on podcasts is proving to be more effective than on other digital media. A popular ad format (drawn from radio) is the host-read message, often delivered with entertaining commentary or personal anecdotes. Surveys find that listeners tolerate these ads well and even enjoy them. When the spots include special offers, advertisers can directly attribute a customer inquiry or sale to a particular podcast, giving them a measure of their ad’s effectiveness.

The rise, in 2020, of dynamic-insertion technology has now given advertisers the opportunity to place timely and geographically relevant ads within podcasts, further increasing their appeal. In 2020, prominent brands like AT&T and Toyota started to advertise on podcasts for the first time. The Interactive Advertising Bureau expects ad spending to grow by 20% this year and as much in the next two years as it has in the past 10.

For creators, revenues have been holding steady at a high CPM (cost per thousand listeners) – as high as cable TV and much higher than other digital media.

Creative and Technological Innovation

With growing audiences and sponsorship, combined with low barriers to entry, podcast offerings have exploded to more than 1.7 million. (Nielsen.)

The eco-system has grown to include a dizzying array of studios, hosting, membership, and ad-sales platforms, advertising agencies, and data analysts. Here’s a recent map of the ‘podscape’ which, interestingly, does not include YouTube where many podcasters are building impressive audiences:

This Podscape also does not show results of the recent wave of acquisitions. In addition to buying podcasts and studios, Spotify, Amazon, SiriusXM and iHeart have swallowed up ad sales companies. (YouTube has Google Ads, while Amazon is building a unique advantage with its smart speakers. When listeners hear an ad for a product they want, they can instruct Alexa to send it.)

As they aim to offer simple, one-stop shops for listeners, advertisers, and creators, the platforms are, in turn, building new tools. Spotify and Apple recently announced subscription services: Fans can pay a fee and listen ad-free. Creators on Spotify can now access its music library for no cost, which will surely spark lots of new music podcasts on that platform.

Think Strategically

But as the platforms flex their muscle, it will be harder for new podcasts to break through. (Right now, creators need at least 30,000 ‘downloads’ to attract advertising.) Success demands a sound strategy.

Production quality matters. Famous names, distinctive casting, or a provocative approach are likely to spark immediate interest, as the success of Smartless and Call Her Daddy indicate. (Comedy is definitely hot right now.)

Both Smartless and Call Her Daddy rely on the talk format, popular in radio. Less famous and provocative creators are finding success with immersive narratives.

Since the success of Serial – a well-reported, first-person story that unfolded over 12 episodes – studios like Wondery have excelled at multi-part storytelling, documentary-style episodic reports, and even dramatizations with actors and rich sound effects. Premium producer Cadence 13 has announced a slate of 90-minute, immersive, fictional stories described as ‘movies for your ears.’

Interactivity in podcasting — popular in live radio — is just getting started. We’ve also just witnessed the launch of social audio, i.e. Clubhouse, that could lead to exciting new formats.

Meanwhile the growing audiences of female, Gen-Z, baby-boomer, Hispanic and Asian-American listeners will demand podcasts tailored to their interests. And there are still many potential listeners out there. Far fewer Americans stream or download podcasts weekly (26%) than tune into AM/FM radio in their cars (more than 80%). And that’s just in the U.S.

In general, the rules that dominate in other media are starting to apply to podcasting. Know your audience and create for it. The more your approach meets a need for your listeners and the easier it is to market to them, the more success you’ll have.

Finally, think beyond podcasting. We’re likely to look back in five years and realize that, in 2021, on-demand audio was just getting started.