In today’s Hot Pod Insider, I mentioned my interview with Acast CEO Ross Adams, and below is the edited and condensed transcript. Feel free to dive in, and for those of you wanting the highlights, check your inboxes for my write-up.
Ashley Carman, lead writer, Hot Pod: Acast went public this year. Why did it go that route?
Ross Adams, CEO, Acast: We’ve obviously done quite a few rounds of fundraising, and we’re a seven-year-old company, and if we look at the next raise that we did, the Board of Directors decided this was the best way — one, it gets us good exposure to international money and gets our name out there. Plus, being public, we’re exposed more and written about more, so it gives us that greater exposure, and they felt it was the right time to do that. So, raising $160 million means that we can really focus on growing this business now because when you do fundraising, it does take distraction away from the business. So, yeah, we had a successful raise, and it’s all good. I’ve just not been looking at the share price.
Yeah, going public just seems very stressful! Like you have to deliver growth every quarter.
It is really difficult because you’re in the public eye now. You can’t say, ‘Oh, you know what, it was just a bad quarter, don’t worry about it.’ The whole market will react exactly to what you say, and also the sentiment that I say, every single word. If I say, ‘We had amazing growth,’ [investors] will be like, ‘right, so when you grew 130 percent last quarter that means amazing so when he uses that language again…’ It really goes down to that nuance, so it’s quite a scary prospect. But the good thing is we’ve had seven years now of consistent growth, and we have done such an amazing job of building the podcast market especially in Europe and Australia and, now, making big headway in the States. We’re very comfortable with telling our story, and while ad revenue isn’t like SAS revenue where it’s very predictable, we see advertisers continue to come back, so we’re pretty comfortable with how predictable it is. So, yeah, it’s a good way to get our name out there; then we raised a good amount. Let’s see how this goes, but hopefully it’s gonna be all good like we think.
Where are you focusing your growth efforts globally, and what strategies will you use to grow?
A while ago, we bought a company called Pippa, allowing us to open our platform and anyone to join the platform. We’ve seen some great growth there. We’ve seen growth with the partnerships we’ve done with the likes of Patreon by powering their podcast proposition and seeing a lot of content creators come in that way. And we naturally attract more through a network effect — when you sign a great piece of content, it just flows that way that we attract more, the more we sign.
Growth-wise, I think that if you look at the market and how it’s going to change in the next five years globally — because we’re a very global company. We focus internationally, and we’re the only ones really who have feet on the ground in all the markets we’ve got, which is 12 markets. It’s interesting how the podcast ecosystem is going to explode, and actually, if you look in five years time, of course America still is the core part of the commercial, the business, and where the future of the industry is, but if you look at growth and listens, actually, Asia will kind of overtake America in five years time, and Europe won’t be too far behind, almost sort of similar size to the States. So, actually, we see growth everywhere, but expansion is a real key part of our strategy, and that was part of the raise that we did. We said we would allocate a certain amount of that [money] to expanding because we’ve repeated success in 12 markets, like I mentioned, and it’s about how we do that now in new markets. Do we look at Asia? Do we look at Spanish-speaking markets? We haven’t laid out exactly where, but we’re definitely going to expand, so growth I think is going to come from a lot of places.
When you’re referencing the Asian podcasting market, are you including China?
Ex-China because, obviously you’ve got Himalaya out there, and they do a fantastic job, and it’s been a really interesting market looking at that and how they operate because ad revenue is the small part, and subscriptions is the big part. It’s a really interesting market.
It is a very unique market, but it’s huge, and I think there’s a lot to learn from how they look at subscriptions and how they look at content and distribution in general, but it does operate very differently to the rest of the world.
Some of your competitors, like Spotify specifically, see education as necessary for growth. They run a creator program in Brazil, for example. Do you think you need to educate new markets about audio, and how are you going to bring new people into the audio both as listeners and show creators?
We see different markets exploding at different levels, and there’s certain trigger signs where you know a market is ready to explode. One of the first signs is when radio starts to really focus on releasing a lot of their shows on demand. That’s a first trigger, and then you start to see some independents rocket in out of nowhere. We do [a thing] called Aclass. Aclass is where we educate underrepresented voices about how [they] should be podcasting.
We also have a bed of inventory where we can start to amplify and talk about what we do and talk about the opportunity, which helps attract new players to it, and being platform agnostic is quite unique in this scenario because [we have] competitors, like a Spotify, but their core strategy is to keep you on Spotify and keep you focused on Spotify. Our strategy is to be platform agnostic. If you’re in this burgeoning creator economy creating audio content, podcasting, you want to be putting your content in as many places as possible and, therefore, being rewarded for your craft in as many places as possible, and that can’t happen if you go to just a one-walled garden. So we’ve got quite a unique approach to the others.
But I don’t necessarily see Spotify just as our competition really because you have elements of what Megaphone do that compete, elements of what Anchor do that compete, elements of what their marketplace does that competes, but inherently, they’re all about streamed listens just on their platform. We are different when we’re providing all the tools in one place rather than different platforms, and one marketplace where demand and supply mix, and that’s the kind of network effect we create.
Your note on when a market is ready to pop is super interesting — do you have people on the ground in all these various countries paying attention to local radio?
We have people in 10 out of all 12 markets, and in the other two markets, we have people on the ground in some respect, be that a third-party seller or someone who’s checking out the market for us and trying to evolve that market. When it comes to new markets, we have a new markets team, and we do research. As you know, it’s very hard to find out what’s going on in the podcast world because nothing’s really reported widely, so it’s understanding the creators, and also, it’s understanding how some of our content is consumed internationally.
We see, on average, between 15 to 30% of most English-spoken content travels. I think the last stat we released was our top 100 US-hosted shows, 22% of their listens are outside of the US, so that almost gives you a bed of inventory where you should be expanding because if you want to be pretty efficient at monetizing you need to feet on the ground in each one because, inherently, advertisers are local. If you want to maintain those contracts, and now dynamic ad insertion in America seems to become the norm, suddenly, advertisers are like, ‘Well, I want US-only, not everything baked in.’ So, suddenly, there’s a big bank of inventory that’s been left on the table, which is what we are very good at monetizing, especially on all platforms.
Spotify announced Acast as a partner for its Open Access technology. Do you have an update on when that’ll be rolling out?
No. For us, that’s something that we’re investigating and talking to them about, but we have not owned that at the moment.
Some of your competitors are pushing podcasters to host natively on their platforms — we see this with Apple Podcasts’ subscriptions and Spotify with Megaphone and its ad marketplace. As a hosting platform, do you see this as a threat, and how do you plan to combat it? Also, I’m always thinking about the ripple effect these pushes have on podcasters themselves. How do you think the labor part of this evolving world will shake out?
We’ve got a great relationship with Apple and the same as Spotify, actually, and the other platforms. We speak to them on a weekly basis because we know what shows are about to release, and they’ll only see the new shows when they start to trend on their platform, so we have that step ahead where we want to help them see these shows before they launch and feature them. It’s really important to have that relationship.
When it comes to Acast+ and the fact that Apple and Spotify or Anchor are getting into the subscription game, that’s obviously great because it talks a lot more about subscriptions within the space. Like we talked about earlier with Himalaya, I believe subscriptions are going to be a really interesting part of the mix. What’s nice about this medium is since we invented dynamic ad insertion seven or eight years ago, we’ve done a really good job of understanding how to fully monetize the free version. We look at freemium as a model, especially how Spotify launched, which was the company I helped launch in 2008.
We’ve gotten very good at monetizing the free; where’s the premium? The premium is coming now with Acast+. It’s great that Apple is talking about it, and Spotify is talking about it. But especially with the likes of the Apple / Epic case, third-party paywalls are becoming accepted, which is great, so, therefore, the future support of Acast+ is looking fantastic. They really like what Acast+ is — it’s a different process. And for us, if we can make it the same place you put your ad -supported content … and it’s available on all the platforms; the ease of that, we believe, is the one that creators will choose. Whether that’s the entire market or part of the market, the market is big enough for all to exist, but for me, it’s just good they’re talking about subscriptions. Our difference is we’re available on all platforms.
We’re seeing some really interesting data because we launched this in March in beta, and we’re onboarding more and more content creators every single week. In the beginning, we started to see, roughly, those who were part of our marketplace with the ad-supported model, they started to see 20 percent increase in revenue on a monthly basis by adding ad-free to their model. Those who really jumped in and did exclusive content and really pushed their paywall — there’s one called Tommy, Hector & Laurita, which is an Irish one — they’re now seeing a 59 percent increase in revenue.
So, I’m really excited about what this can do for the really small creators, the middle size, and the large. I think it’s going to work for [all]. I think it’s just great that everyone’s talking about subscriptions.
Do you really think subscriptions will take off for everyone, or do you think it’ll end up being a situation where most shows primarily monetize through ads while the rest do so through subscriptions?
I think with most creative economy mediums, you will see that the top 10,15, 20 percent represent 80 percent of revenue. That’s kind of natural, I think, with any of the creator economies. You might get that with podcasting, but you do still get those nuances of podcasting where there’s niche subjects that really go deep and are really covered for those niche audiences, but those niche audiences are prepared to pay a lot of money for that exclusive content and even more so when they’ve got a better relationship with the creator. As you know, audio is such a one-on-one medium; you have such a close relationship with the creator that I think even more will convert than necessarily other mediums who don’t really have the relationship. They view a YouTuber, but they don’t necessarily have the intimate relationship like audio.
I think it’s going to be a fantastic proposition that’s going to suit a lot of small and big creators. We have one show we’re talking about in Sweden around fly fishing. If you’re going to have 1,000 listeners, you’re never going to make a huge amount of ad revenue, right? But if 500 of those listeners are going to pay 25 bucks a month for exclusive content, you might start to make some good earnings off the back of this, so I think it’s gonna fit a lot of creators, and they’re going to make some good money.
Is there actually a podcast out there charging $25 a month?
It’s an example we use. I can genuinely see that. People really go into these niche subjects and will pay a lot of money for extra content.
Acast is investing in shows and networks, and I’m curious what makes you think one will succeed. What makes you say yes to putting your money behind programming?
We see different demand in different markets. If you think back on how podcasting exploded seven years ago with Serial, murder shows did incredibly well in America with advertisers; Mailchimp and Audible sponsored it. Whereas, in the UK, advertisers were a little hesitant to be around content that was talking about a murder and commercializing that. So we see these local nuances that work, so we see what happens in demand, and then we can kind of educate the supply side that in the UK, you should be creating more parenting podcasts because we can’t get enough of them. They’re completely sold out. So, actually, if you’ve got networks that are wanting to create new shows, here’s the data that we see from the demand side, and here’s the data we see from the consumption side, and they start creating their shows. So it’s not necessarily about us creating new shows — that’s not what we do, but we help facilitate and educate that supply side to create the right content.
So if you’re not creating new shows but instead trying to sign a licensing or distribution deal with an existing one, what’s your barometer for success? What makes you want to pursue a deal?
A lot of it comes from supply in different markets because we haven’t got enough supply of something. We can’t fulfill the demand. So that’s a good way we approach certain shows, but that’s only part of what we do because we have the open model — we have thousands of shows joining us each quarter anyway, so you almost have a pool of talent there that you can start to push through the funnel. If you start to see spikes in certain parts of content, [we should] put [the show] through what we call the creator network, which is the team that looks after the main talent within Acast. Each market will have their limits on what shows we approach, at what level, and what level of service we give those shows, but for us, it’s about creating that automated pipe and creating more shows to come in through the automated pipe, so we create that scalable machine. When you have key content creators on your platform, especially indies, that network effect happens. You start to attract more and more, especially from an automated side.