The Business of Podcasting

Published on February 14, 2020

At Solve , we are always looking for interesting new ways to grow the brand and find new fans of our interactive murder-mystery / true crime content. Podcasting is growing quickly - 22% of the U.S. now listens weekly to a podcast - and one of the biggest categories is true crime. Podcasts were a natural fit as our next Solve format.

The Solve podcast debuted in December 2019, has over 2 million downloads, and ended up hitting #2 on the Apple Podcast charts. This is a format we will be doubling down on over the coming years as we look to introduce new audiences to our murder-mystery / true crime content.

Podcasting, despite being around since 2005, has only recently entered the zeitgeist and seen exponential growth. See below from Google Trends:

Podcast Interest Graph

Why has it taken so long for podcasts to become mainstream? Apple. They’ve had two (!) people supporting podcasts despite owning the market three years ago. Now, they’ve seen that share dwindle from 80% to 52% . Why haven’t they invested in a robust analytics platform for creators? The only metric creators see is downloads - you don’t even know if people listened to the podcast. Why didn’t they build a programmatic ad network, or an API for an ad network (like Scripp’s Midroll) to hook into?

Apple hates ads and has eschewed them to protect user privacy. It’s the same reason Apple Maps is an inferior product to Google Maps - Google Maps takes copious amounts of user data to improve itself. It’s a strategic decision they’ve made - one they aren’t shy about reminding you of .

Because Apple provides no data to creators and monetization is poor - TechCrunch reported that revenue per user per hour is $0.01 for podcasts juxtaposed to $0.11 for terrestrial radio - podcast growth has been stunted and marketing spend has been minimal. The number one and two ways that people find out about a podcast are through social media and word-of-mouth, respectively. It seems like everybody has a podcast now, but the market is dominated by celebrities (people with established audiences that can easily be migrated) and existing media outlets (New York Times, iHeart Media - our partner, Vox, The Ringer).

As a result, podcast ads are hardcoded into the content. Data for ads is non-existent - advertisers don’t know the reach of their campaign and are unable to do the most basic demographic targeting. As a result, most podcast ads are from direct-response advertisers (e.g. subscription boxes and other direct-to-consumer brands) or advertisers where customers have a very high lifetime value (e.g. ADT, Zip Recruiter, others). The podcast advertising ecosystem is reminiscent of the early days of monetization at Snap - new ad format, high CPMs, no data, unscalable.

As a result, Spotify, and to a lesser degree Luminary , have stepped into the whitespace created by Apple in 2019.

Spotify’s reasons to pursue podcasting as a strategy are straightforward:

To execute, Spotify has spent more than $600 million on acquisitions over the past twelve months buying Gimlet, Anchor, Parcast, and most recently The Ringer, which was bought for an eye-popping $250 million. Gimlet and The Ringer’s existing library continues to be available on all podcast networks, but one can imagine new shows being exclusive to Spotify.

In addition, Spotify announced the launch of Streaming Ad Insertion which will provide advertisers with more precise targeting (basic demo, device, location, etc), campaign performance, and measurement. This is really just a function of the internet - people will be listening to podcasts while connected to the internet which will allow for dynamic ad insertion. Undoubtedly, this will increase the size of the funnel of advertisers inside of Spotify’s podcast network and yield better monetization for creators, setting off a virtuous cycle: better monetization, more content, more users.

Where is Google in all this? One would suspect they’d be a bigger player given Android’s global share. Google has less than 1% of the market and just re-launched their player in 2018. Spotify appears to be the big winner internationally - Podcasteria study shows they control nearly 54% of the spanish-speaking market to Google’s 13%. Not great when you are the default player on an Android device.

What will 2020 bring? More murder-mystery and true crime podcasts for sure. An acquisition of Wondery ? It certainly would be expensive given the price of The Ringer. Apple is reportedly stepping into funding exclusive content as a way to grow the ecosystem while eschewing an ad model. Hopefully, more independent creators arise given the investments being made by the platforms. Regardless, despite how long podcasts have been around, it is still early days and a lot will change in 2020.

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