The Podcast Industry: What’s the State of the Market?
By: Nate Hawkins
The need to be constantly entertained in 2021 presses on ordinary people every minute of the day. What do you do when you’re on your lunch break? Or driving to work? Or making dinner? The answer for almost 40 percent of Americans is the same: podcasts. Podcasting has become the go-to form of entertainment for millions of people because it’s easy, engaging, and educational. Like other entertainment platforms, like YouTube or blogging, the podcast industry is rife with opportunity for profit through creating, investing, and advertising. The next great market opportunity has arrived, and it still has plenty of room to grow.
How Much Has Podcasting Grown?
The term “podcast” gets its name from “iPod” and “broadcast”.1 This type of audio show started around 2005 with the launch of Apple’s iTunes. Many radio stations like BBC, CBC, Radio One, and NPR quickly jumped on board in an effort to upgrade from traditional radio to a more modern approach.2 However, the industry did not take off as some hoped. Competition for viewership with other forms of entertainment like YouTube hindered the podcast industry’s growth. The podcast show’s inability to accurately determine the amount of listeners also complicated the competition. Undeterminable viewership deterred many companies from investing in ad space, and podcasts consequently returned little to no profit.3
Since then, better technology and higher-quality content has helped the podcast industry take off. Figure 1 shows the growth of listeners since 2013.
Source: United States; Activate; Edison Research; PwC; 2019; 12 years and older.
Figure 1 shows the steady increase of podcast listeners, which is projected to increase in the coming years. To give a frame of reference for the graph, the number of monthly podcast listeners in 2020 (103 million) exceeds the number of viewers that watched America’s biggest event of the year, the super bowl (roughly 96 million).4
Why Are People Listening?
According to The Economist, one main reason for the increase in podcast listeners is technological advances. Better technology makes podcasts more accessible and easier to browse. Smartphones make it simple to subscribe to shows and download episodes with the click of a button. In fact, Apple iPhones even come with the Apple podcast application already installed, with all content completely free.
Another reason people are listening to podcasts is because they feel “productive” while doing routine or mundane tasks.5 In Lisa Perks’ study on podcast listener habits, she found that many people love to multi-task. They feel the need to listen to a podcast while folding their laundry, cleaning their home, or mowing their lawn, otherwise it’s time wasted. Perks’ epitomized this group of multi-taskers by stating, “If my phone’s dead or charging or something I feel like, ‘Ugh, waste of time’ when I could be listening while I’m folding laundry or whatever.” Listening to podcasts is an easy way to “be productive” while doing simple tasks. Other forms of entertainment, like social media or television, don’t have this flexibility.6
In addition to doing household chores while listening to podcasts, podcast lovers want to listen while commuting. New-age cars with internet and Bluetooth capabilities facilitate this desire. A study conducted by Notre Dame University finds that car’s ability to stream podcasts heavily contributes to the “great podcast renaissance.” The study explains why the podcast industry loves car-commuters: “Car-based listeners are captive, they tune in for long stretches at a time, and they’re valuable to advertisers.” While driving, it is difficult for drivers to skip advertisements or change stations; listeners almost always hear the ads. This means an increase in the effectiveness of podcast advertising and more money coming into the industry.7
How Much Will It Grow?
The best way to illustrate the potential growth for podcasts is with Spotify’s nearly 1 billion dollar purchases. In 2019 and 2020, Spotify attempted to become the world’s premier podcast hub, totaling purchases for podcast shows and apps to 900 million dollars. One podcast alone, The Joe Rogan Experience, sold for nearly 100 million dollars. Spotify has invested heavily in an industry expected to boom.8
Other streaming giants have also been pouring money into the growing industry. According to Bloomberg Businessweek, Apple iTunes has been making and producing new podcasts intending to overhaul their podcasting business. Amazon has also gotten in on the action, recently acquiring a podcast producer, Wonderly, for its streaming service.9
So, what are the numbers that are driving these companies into spending billions on upgrading their services? Edison Research reports that podcast listeners are “young, educated, and affluent.”
Notice that 34% of the market fall between the ages of 15 and 34. Very few podcast listeners are over the age of 55. These listeners will continue to listen for decades to come. Furthermore, podcast listeners tend to come from households with large incomes, and therefore have more money to spend. This makes podcast advertising more profitable. Finally, podcast listeners tend to have more years of schooling. This is a good sign for the industry as those with more schooling tend to make more money, own a business, and make political decisions.
The demographics of podcast listeners show that their audience is already young, rich, and educated. Imagine where those same individuals will be 20 years from now and the buying power they will have. The podcast industry is booming now but has the potential for so much more as listeners continue to buy products advertised on their favorite podcast.
This is why Google, Amazon, Apple, and many other companies are now trying to get an edge in the market.
Why Do Ads Work on Podcasts?
Just like with television or radio, ads on podcasts come up between content about every 15 minutes and last about 1-3 minutes. Podcast advertising, however, is believed to be more effective. A study conducted by the Internet Advertisement Bureau (IAB) reports that 67% of respondents could name a product or promotion mentioned in a podcast advertisement.10 Bloomberg Businessweek reports that advertisers are willing to pay more per 1,000 listeners compared to super bowl ads.11 This trend can likely be explained by three advantages inherent to podcasts: hosts sell the product, listeners remain on the station, and marketers target the audience.
Podcasts are unique in that, instead of presenting an actor that’s reading a script, advertisements are usually done by the hosts themselves. Hosts frequently advertise products that they use themselves or mention during the show. This helps listeners stay engaged as they enjoy listening to the host. They are also more likely to trust the product because someone they know is advocating for it.
Another advantage that podcast ads have over television or radio ads is that listeners don’t have the option to change channels only to switch back three minutes later after the ad has passed. As discussed above, listeners tend to listen until the end of an episode, which means they listen to all the ads in between.
Finally, because podcasts usually have specific audiences, marketers can run specific ads. A podcast about business can run an ad about a hiring tool. A podcast about sports can run an ad about a sports bets app. These provide unique opportunities for marketers to sell to a target audience. This also makes advertisers more willing to spend more money which increases the value of the podcast industry.
Conclusion
Podcasting has come a long way in the last 15 years. More Americans every year are discovering the joys of listening to people talk about their hobbies and interests. Although the industry struggled in the early years with competition and uncertainty, it has increased steadily to become a major player in the entertainment business. This is evidenced by big companies investing heavily in their podcast businesses. Forecasts project that the industry will continue to grow in the coming years as more Americans begin to listen to podcasts and podcast advertising becomes more reliable.
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