Whether catching the latest news, sharpening entrepreneurial skills or simply seeking an inspiring story, podcasts offer something for everyone, listeners and advertisers alike. And tech-savvy target audiences – highly engaged, highly educated and highly compensated – are tuned in.
Podcast advertising is a powerful way for brands to reach and engage these loyal listeners. By the end of 2020, 105.6 million Americans will listen to podcasts, surpassing 100 million for the first time, and the soaring number of audience members has not been lost on advertisers.
Although COVID-19 cut a swathe across growth in countless sectors, podcast advertising is a rare bright spot. After a brief slowdown in March as most of the country went into self-quarantine, listening was on the upswing in May as Americans adjusted to a new pandemic lifestyle and returned to their podcast-listening habits.
This article features key findings from the IAB U.S. Podcast Advertising Revenue Study, prepared by PricewaterhouseCoopers (PwC) and released in July 2020. In the study, companies that generate revenue from podcast platforms share their insights into high-priority areas before and after the COVID-19 pandemic. Areas range from revenue increases and top content genres to buying trends and the most listener-favored ads.
Podcasting’s Resilience Propels Advertising Revenues to Nearly $1 Billion
The podcast industry is growing, and it is growing fast. Among the IAB study’s findings is that 2020 U.S. podcast advertising revenue is expected to jump 14.7%, nearing the groundbreaking $1 billion mark, despite COVID-19. Further escalating medium and advertiser optimism, and long-term viability, is that revenues are slated to rebound in Q3 and Q4 2020. Although the pandemic had an expected impact on podcast advertising revenue, which rose a whopping 48% to $708.1 million in 2019, a resurgence is underway.
Versatility Is a Key Growth Driver
Podcasts’ agility and flexible format – and quick message adaptability – were cited as critical revenue builders in the study.
Podcast advertising’s resilience is also built on the medium’s distinct ability to consistently perform the following, even during fragile economic times:
- Tell compelling stories.
- Deliver a wealth of content on nearly every conceivable topic and in a variety of forms.
- Attract multitasking listeners with everywhere and any-time content.
- Offer brands the opportunity to advertise products to target audiences.
- Tap into the universality of smartphones and surge in audio learning.
An additional factor in podcasting’s endurance is the rapport hosts share with their listeners that is unlike any medium outside of Audio. Listeners cultivate trusted relationships with podcast hosts, who cover a near-limitless range of topics with genuine enthusiasm and vocal points of view.
Podcast listening is no longer limited to spikes during morning and evening hours. It is an all-day experience. Higher listening hours and an expanded program portfolio, coupled with increased technology for KPI measurement, have created a perfect storm for growth.
Annual Buys Rise to the Top
Long-term buying and planning experienced a seismic shift in 2019. Once holding one of the smallest shares of overall buys, annual buys doubled from 24% in 2018 to 47% in 2019 according to the IAB study, while scattered advertising declined from 34% to 21%.
The shift demonstrates the priority that brands are placing on the importance of being able to lock in inventory and categoricals in the space. Making podcasts a significant part of the fiscal-year budgetary spend, which is expected to fuel annual buy’s trajectory through 2020, is an additional priority.
News Genre Booms
The study confirms that even during unprecedented change, many content genres are doing more than staying on track. They are thriving. For instance, News, at 22%, captured the greatest share of advertising revenue in 2019. Comedy and Society & Culture, at 17% and 13% respectively, rounded out the top three revenue-producing genres.
Mounting consumer concern over the economy, politics and social issues is fueling the News genre’s rise, which will further accelerate in 2020 as November elections near. Other content genres showing an uptick in advertising spend include Entertainment, Lifestyle and Sports, along with narrative-driven programs, such as Once Upon a Time and The Gangster Chronicles.
The COVID-19 Factor
Q1 and Q2 2020 witnessed a dramatic change by brands in their marketing messaging, which spoke to Americans’ reassessed health, economic and lifestyle priorities post-COVID-19. The IAB study reports that both mission-based and cause-related marketing content increased 75%. These shifts provide unlimited opportunities for brands, including branded integration, video and, when resumed, events.
Consumer Lifestyle Changes Unlock Opportunities for Retail and Financial Services
Devoting more time and resources to health, and spending extra time at home, are part of consumers’ new pandemic lifestyle. These lifestyle changes are reflected in podcast advertising revenues for the IAB study’s Retail category, with Health/Wellness and Home & Appliances emerging as the largest subcategories. Health/Wellness won the largest percentage of revenue with a 22% share, followed closely by Home & Appliance with 19%.
Retail claimed 22% of 2019 advertising revenues, matching 2018 performance, with Financial Services garnering a 16% share. Despite the economic uncertainties of COVID-19, both categories are slated to maintain their market strength throughout 2020.
Advertisers Harness the Power of Direct Response Campaigns
At a time when speed, action and conversions have never been more paramount for advertisers, direct response is by far surpassing other campaign types in generating podcast advertising revenue. The study shows that for the second consecutive year, direct response advertising represented half of revenues – 54% in 2019 and 52% in 2018. Also for the second consecutive year, Brand Awareness followed, with a 42% and 38% share, respectively.
Among the advantages of highly effective direct response ads are an immediate determination of listener response. By continuing to provide content targeted to engaged audiences, direct response advertising can carry its momentum through 2020.
Host-Read Ads Resonate Most Among Loyal Listeners
All ads are not created equal. Nowhere is that truer than in the case of podcast advertising, where host-read ads are again extending their winning streak among advertising types. The IAB study reveals that host-read ads account for 66% of revenue, up slightly from 63% in 2018 when it also held the number-one position.
Underlying the strength and influence of host-read ads are hosts’ personal connection with audience members, understanding of their values and priorities, and finesse in weaving the ad into the program. The results are hosts and podcasts that are informative, believable and speak to their audiences, and ads that deliver sales.
Looking Ahead, There Is More to Come
While the COVID-19 pandemic slowed podcast advertising revenue growth, the slowdown was decidedly short-lived. In fact, advertising’s rebound comes as no surprise since podcasting has been steadily expanding and diversifying programming – and widening audiences – consistently in the past decade. Today, growth is more apparent than ever before as revenue approaches the $1 billion threshold.
With a base of loyal and valuable listeners, podcasting has cleared the most formidable hurdle for any medium. And through the continued mix of quality content, creative ideation and cross-platform strategies, podcasting and its advertising opportunities will assert their roles as media-plan mainstays for the long term.