Issue 266,  published July 14, 2020

IAB: 2020 Podcast Ad Projections Revised Downwards

We now have a tangible glimpse at how the pandemic has affected podcast advertising in the US — as opposed to listenership, which had been our primary focus over the past few months — courtesy of the IAB’s fourth annual podcast ad revenue study that came out yesterday.

These reports are principally supposed to provide insights into podcast advertising for the year before, but the IAB moved to conduct a supplementary survey to account for the economic pressures of the pandemic. As expected, the US podcast advertising forecast for the rest of 2020 was revised downwards, from 29.6% in projected growth down to 14.7%.

That’s down by almost half. Nevertheless, there are encouraging signs, as the study found that ad revenues are expected to bounce back in the third and fourth quarters. They won’t meet previous projections, of course, but the bigger point is that the drops are expected to be less dramatic than originally feared.

Furthermore, the IAB maintains that podcasts can be considered to be “more resistant” than other media formats against the economic pressures of the pandemic. Three main reasons were cited:

  • The format’s relative flexibility around swiftly changing ad messaging to meet the pandemic context;
  • One of podcasting’s faster-growing and more reliable genres, News, also happens to be one that’s heavily favored by advertisers; and
  • Already strong categories of podcast advertisers, like direct-to-consumer brands and financial services companies, are largely maintaining their market position despite the pandemic.

The downward revision comes after what turned out to be a particularly strong 2019, with the year’s podcast advertising hauls beating expectations. The sample reported having collectively brought in about $503.9 million, more than the estimated $467 million. The total market estimate for the year, meanwhile, was pegged at $708.1 million, more than the estimated $678 million. These numbers indicate a whopping 48% growth in US podcast advertising revenue in 2019.

As always, it’s important to consider the study in its proper context. The report builds its findings based on surveys of self-reported numbers delivered by a pool of podcast publishers meant to represent a critical mass of the market, from which a broader total market estimate is generated. Participants in that pool include the usual suspects: Midroll Media, National Public Media, Spotify, Megaphone, and so on.

Should you peruse the methodology, you’ll see that this year’s survey received nineteen responses — down from twenty-two in last year’s report — and that the follow-up COVID-19 impact survey drew only seventeen responses. I don’t think that fundamentally changes anything about how we should read these findings, but it’s worth clocking nonetheless.

Anyway, don’t sleep on the 2019-specific findings. Here are the ones that stood out to me:

(1) The two things that publishers most cited as the drivers behind decreased revenue projections were “cancelled campaigns booked but not yet live” (31%) and “paused campaigns currently live” (25%) This gives a sense of scale to what we’ve anecdotally found in the early weeks of the pandemic: that publishers were seeing various advertisers pulling back their spends as they sought to figure out the new conditions.

Two other reasons worth noting: 19% reported attributed decreasing revenues to a lower volume of advertising requests, while only 3% reported not having enough impressions available to tap into advertising campaigns, which I read as a proxy for changes in listenership.

(2) As discussed earlier in this write-up, News appears to be the podcast genre most favored by advertisers. Specifically, the genre captures 22% of the overall advertising revenue share. The next three largest categories are: Comedy (17%), Society & Culture (13%), and Business (11%).

This year’s report doesn’t show the changes in percentage share by content genre compared to previous years. I suspect this might have to do with the changes in category usage: this year’s report seems to be using the Apple Podcast taxonomy — hence buckets like “Society & Culture” — for the first time, which means that you might not get clear matches with the genres listed in the last few reports. So keep that in mind if you go back to check things out.

(3) This is a data point that should be meaningful to advertising agencies that have been in podcasting for a while: the proportion of baked-in and dynamically inserted advertising remains virtually unchanged between 2018 and 2019. I imagine we should expect this to shift dramatically when Spotify moves to kick its Streaming Ad Insertion product — and its supply chain, presumably provided via Anchor — into high-gear, in which case I assume those dollars will be classed as “dynamically inserted advertising.” Also relevant to this trend: the growth of programmatic advertising-minded hosting platforms like Megaphone over time.

Meanwhile, host-read ads continue to be the dominant ad format, growing its share from 63% to 66% over the past year.

(4) Direct-to-consumer brands still represent the largest share of podcast advertisers, unchanged at 22% compared to last year, but fast-growing advertiser types include: Telecommunication, Consumer Packaged Goods, and “Professional Services for Non-Business Entities.” The advertiser types with decreasing shares include: Financial Services (though it still makes up a sizable 16%), business-to-business companies, and automotives.

All in all, the IAB study indicates a broadly positive outlook for podcast advertising despite the pandemic. The stark reality remains: it could have been so much worse, even catastrophic, for the still-young podcast industry. In late March, I was having conversations where podcast producers and executives were quietly wondering if overall audience numbers would hold, let alone advertising. I wonder if some of this resilience could well be attributed to podcasting’s  youth and smaller size relative to other media.

Keep in mind, though: the structure of the IAB study is principally built around the biggest podcast publishers, meaning that it may very well not be capturing the experiences of the smaller-to-medium-sized publishers in the data. (Not unlike, you know, the way using corporate indicators to reflect the state of the economy often glides over how small businesses are faring within the economy.) Which is to say, while the story of podcast advertising writ large appears to be positive, it might also be hiding a story of centralization.

Furthermore, while advertising is the largest and most prominent business model for podcast publishers, it isn’t the only relevant business model in this ecosystem, and I’d be remiss if I didn’t mention that there is a growing appetite and push towards non-advertising revenue channels, one that applies to both bigger publishers and smaller independents. This appetite has been fueled in large part by the pandemic, which brings attention to the volatility and vagaries of advertising money, but it’s also been driven by an increasing sense that the pipes of podcast advertising will likely end up being largely controlled or dominated by the bigger corporations: Spotify, iHeart, SiriusXM (now that the Stitcher sale has been finalized), so on.

Historically, the strongest non-advertising revenue channels have been direct support (Patreon, membership, so on.) and live events (now indefinitely on hold, or transmuted into the infinitely-more competitive live streaming space), and to my mind, there hasn’t yet been a persistent data collection effort to track the health of any of those channels. Perhaps there should be.

I run this thing.