HP: Can you tell me how Podfront UK is going to work?
Diehn: Yeah, so, a couple of things. First of all, this is an entity with a very clear purpose. It is meant to deal directly with something that we at Stitcher and Wondery — and I guess many other American publishers — experiencing, which is that we’re getting all these listens from audiences in the UK. It’s usually the third largest territory for any English-language podcast, after Canada. Nowadays, we’re at a point where we have shows like Freakonomics and My Favorite Murder, along with Wondery’s various hits, that are doing half a million downloads per episode, and if you think about UK listens making up somewhere between five or ten percent of those downloads, we’re talking about sizable numbers.
So, in our ongoing efforts to maximize the value of all the inventory we have, we think it’s important to start going into these markets and finding advertisers who are interested in reaching those specific listeners, as opposed to just lumping them all into the overall mass of inventory that we’re selling to US advertisers. It will help us get more value for listeners who are of interest to specific advertisers in these other markets, and that brings more revenue for us and for our partners, etc. etc.
However, the way we thought it, even though we are producing considerable UK inventory, we figured it is still probably better to have more scale than we have individually. Same goes for Wondery. Our thinking was that, by combining the inventory that we manage together, we now have substantially more scale that can attract more interest from a larger number of advertisers, sponsors, and brands in general. It would make us a more efficient one-stop shop for brands in the UK, and eventually, the rest of Europe.
HP: So, if I’m interpreting this correctly, one of the big things driving the decision to team up was to get past a certain scale threshold?
Diehn: That’s part of it. There’s also overhead involved in setting up an operation like this, and to be effective, you really want to have at least a handful of employees to start out with. It’’s a lot of work, and two companies sharing that overhead is more efficient than one — at least, at this stage of the game. Also, from an advertiser’s perspective, it provides a single point of contact if you wanted to buy into a wide range of podcasts that have significant UK listening.
HP: I remember writing an article, around this time last year, where I was told that non-American downloads for your US-based programming was somewhere between 10 to 30 percent across shows. Is that still the case?
Diehn: Yeah, that’s about right. Again, it depends on the show. Of course, the UK tends to be one of the largest — maybe 5% for some shows — and again, when you have something like Freakonomics, which has a larger international footprint compared to most other shows, you have a situation where you’re like, “Oh, we have all this inventory that we should be doing a better job with.”
HP: Tell me about the timing. Why now, and not last year?
Diehn: Part of it is dependent on the infrastructure. As we move more towards ad insertion, and as everybody moves towards a model where inventory can be partitioned more precisely and accurately, we needed better technical capabilities to do all of these things more effectively. We’ve also been changing the way we sell in general so that we can partition inventory more efficiently, and that actually makes it easier for us to do something like this.
But part of this also has to do with the industry. We felt we had to reach a point where there was sufficient knowledge and demand in the UK for podcast ads.
I’ve heard various reports about European markets, and in some senses, they’re more advanced than we are when it comes to audio advertising. They’ve been doing programmatic audio advertising, I think, for longer and at a larger scale. (The host-read is not as prevalent to some degree in Europe as it is in the US, but programmatic ads are.) The terrestrial radio market over there also has a stronger digital presence in general. So there are some parts of that market that are beyond where we are in the US, and I think we’ve caught up to those pieces.
At the same time, I think there’s enough awareness of the podcasting medium itself now such that we don’t need to fight the fight of teaching people what podcasts are anymore. We can set up shop and hit the ground running. Maybe this was possible a year ago. Two years ago would be harder, three years ago would have been really hard. So yeah, I think it’s that we’ve hit a tipping point where the technical capabilities and the market demand and the size of our shows are big enough where it made sense.
But I think the big question when it comes to international markets — and the UK is the obvious stepping off point for this issue — is: “What’s the most efficient way to enter, and how do we do this?” And so when I talked to Hernan [Lopez, CEO of Wondery] about putting something like this together, it was like, “Oh yeah, this is a less risky way to do this.” It felt like a great first step.
HP: It’s interesting that you describe the European digital audio market as being more developed. I guess the way I see this is: when I interviewed Hernan a few week ago for the story on Wondery’s new funding round, he talked about how American podcast companies aren’t particularly incentivized to adopt programmatic advertising, because they’re doing really well selling host-read ads and premium ad formats. And so my interpretation of Europe leaning into programmatic is that those markets needed to rely on that tool because they weren’t attracting a ton of premium ad formats.
Diehn: It’s possible, but I think it’s more that there’s already a fairly active buying community [in Europe] buying digital audio programmatically, so they’ve been able to slip into that kind of buying more easily.
While there’s a ton of digital audio buying that’s going on in Europe, it’s also a little more concentrated among a smaller number of players. For whatever reason, the fact that programmatic is a little more established in those markets instead of host-read ads might be a function of them not having much demand for it. Maybe it’s advertisers there just being more accustomed to programmatic ads for a long time.
The development of the host-read ad spot in the US happened over a number of years, and it happened out of necessity. It took a long time to get brands comfortable with that idea, and we’re past that point now, but it’s a bit of an anomaly in the evolution of advertising. So we want to export that product over there, and at the same time, I think we as a company — and as an industry — are starting to move beyond host-read spots and starting to really think about a much wider variety of ad products and delivery mechanisms. And as all those things start to converge, we’ll all basically selling the same way in all territories
HP: Where do you think we are with programmatic advertising here in the US? Do you have a sense if it’s going to come out to a significant percentage of all podcast ads sold, or the majority?
Diehn: I don’t know if it’ll be a majority. Also, you’ve got to break down the advertising types and delivery methods to a point that’s a little more fine-grained than that. The idea of data-driven audience segmentation, buying impressions based on audience and audience characteristics, advertisers using their own pre-recorded creative… I think that’s already started to take off. You’ve seen Megaphone doing that for some time, and Art19 is starting down that path. We have done some of that testing with Omny and Triton, and we expect to do more later in the year.
The next tier down from that would be automated, programmatic algorithmic buying using that same format and structure. I think the demand right now for programmatic trading desk exchanges right now is not… super robust. We’re going to have to build that demand over time. But I think that demand will come as audience-based buying becomes more prevalent, and I would certainly expect that audience-based buying — essentially buying ads like the rest of digital media — will absolutely become, if not the majority, then a significant portion of revenue over the next couple of years.
HP: Assuming that happens, what do you think the impact will be on CPMs?
Diehn: Well, I don’t think it’ll erode the CPMs for host-read spots. I think it’s quite clear to advertisers and audiences that the host-read spot or the show-produced spot is still a premium native unit. If anything, you could see some value separation where that unit becomes more valuable… and perhaps more scarce.
You have to remember: anybody that’s just selling host-read spots at the front of the catalogue is leaving an awful lot of inventory untouched in the back catalogue. And most people aren’t a 100% sold out anyway. Really, it’s about finding ways of packaging up all the inventory more efficiently, but for some buyers, having, say, Conan O’Brien voice that spot is going to have an awful lot of power and value and we want to make sure we’re always charging a premium for that right.
HP: Let’s go back to Podfront UK. Will you be opening it up to participation from other US publishers in the future?
Diehn: We’ve certainly discussed it. The way it’s set up right now, it’s feasible. I don’t know if we’re looking to add any actual owner-partners to the mix right now, but this is kind of a first phase. We have definitely talked about podcasts going the other way — for example, repping UK podcasts in the US.
But yeah, it’s certainly possible that we would eventually represent the inventory of other US podcasters. I think we’re open to that. We’ve got to make sure that we have the infrastructure set up, that everything’s working, that we can sell our own inventory. But I think if it proves to be a good company, and I don’t see why we wouldn’t open it up to others as well.