Podcasts: A sound investment for advertisers?

It was a ground-breaking moment in content. It was original. It was utterly gripping. It generated reams of secondary content in both the mainstream media and online—Reddit ran an entire cottage microsite off it—and the engagement figures smashed all expectations. To date, it has racked up more than 175 million downloads worldwide.

Putting that in context, the Mad Men finale got 3 million viewers. Breaking Bad’s denouement, hailed as a television triumph, 10.3 million. ‘It’ averages 7.6 million per episode. 

Just what is this content phenomenon, you ask? A podcast.

Released in 2014, Serial, from radio station WBEZ Chicago, remains the most successful podcast of all time, and is the shining example of the revolution the medium has been experiencing in the past few years. While podcasting has been around since the early 2000s, it had fallen somewhat by the wayside until its renaissance began in around 2010.

Today, there are estimated to be around 300,000 podcasts in the US alone. While the majority do not reach the dizzy heights of Serial, it is clear the medium is growing exponentially. The US is by far the most mature market, but the rest of the world is catching on at various speeds.

And yet, advertisers are still reluctant to get involved. According to research from the IAB, US podcast advertising revenue is expected to rise 85 percent year-on-year in 2017—but only to US$220 million, still paltry compared to TV or digital ad spend.

By that token, Asia is even further behind. Podcasting is nascent here, and it remains a speck on the horizon of almost all advertisers. Yet the ingredients are in place, as are—albeit overseas for now—the numbers. In an industry that serves brands best by looking ahead and moving quickly to find the next big idea, platform or investment, why the reticence with podcast advertising?

The opportunity

Digging further into these ingredients for success are those who see the potential of podcast advertising. Ken Mandel, president of innovation and commerce at Publicis Media APAC, says it is “definitely under-utilised”.

“As media continues to fragment and consumers' lives become even more hectic, there are fewer and fewer opportunities for advertisers to reach busy consumers,” he explains. “Podcasts have oddly become a hidden gem, as time-poor consumers turn to them on their daily commutes, gym visits and general downtime when the eyes need a rest.”

It is here that podcasts have the advantage over other advertising: the ability to reach busy consumers in moments often too distracting for other media platforms to gain attention. Speaking at Rise 2017 in Hong Kong in July, Gary Vaynerchuk of VaynerMedia said this is what excites him most right now about podcasts and audio advertising generally.

“Sound and audio will be selling back to you time that you used to not have,” he said. “When you look at video, it’s taking up your time. Audio is incredibly passive, and you're able to multi-task. The reason I chose to focus on sound is because I’m obsessed about figuring out how to bring value.”

These are some of the factors that led Bernard Leong in 2015 to launch Analyse Asia, a Hong Kong podcast focusing on Asian business, media and technology. There was also the incentive that no one else in Asia was doing it. Even today Analyse Asia remains that rarest of species: a home-grown Asian podcast.

“I want people to know about Baidu, Alibaba, Tencent, Foxconn, Softbank and others, and why they are equally as important as the US tech companies in the business world,” he tells Campaign Asia-Pacific.

Bernard Leong

Leong has produced more than 200 episodes, interviewing local and international business leaders and growing his audience single-handedly. Analyse Asia is close to a million downloads overall, he says, with 16,000 regular subscribers.

But we all know reach is almost meaningless unless advertisers are targeting the right audiences. Here again, though, podcasts offer a tidy solution, as listeners choose the content they want to engage with.

“It is an ‘opt-in’ action, which makes it even better for brands as they know which audiences they are targeting,” says Jean-Marc Thomas, head of digital at Carat APAC. 

Moreover, something that always pricks the ears of advertisers is cost, and podcast advertising is, currently, cheap. Production is often limited to a simple script that is read out by the podcast host, either pre or mid-roll. Compare that to a TV spot or a digital video ad and it’s no contest.

Of course, the difference in scale means much lower dollar returns on a podcast ad, but from an ROI standpoint the case is compelling. Scott McBride, APAC chief digital officer at IPG Mediabrands, says brands could invest in podcasts whether they have short or long-term strategies.

“Think of it as the radio, with fewer competitors, targeting a specific demographic and with more engaged listeners."
— Jean-Marc Thomas, head of digital, Carat APAC

“The ambition is engagement derived from a tangible value exchange,” he says. “Granted there will be brands who simply smash-and-grab while the going is good, but for those vested in using the medium as a longer-term addition to their channel and content mix, it is important to lay the strategic building blocks of reciprocal value.”

A longer-term approach would benefit from something that brands and advertisers are increasingly losing the fight for in today’s cluttered advertising world: loyalty. Listeners often subscribe to podcasts, getting new content on a weekly or even bi-weekly basis, so listening becomes habitual, or even ritual. Over time, podcasts are woven into the routine of consumers’ lives in a way few other mediums can match, which is a highly attractive proposition for an advertiser.

“The following gathered by a podcaster may not be large but it is loyal,” says Leong. “They generally gravitate towards the brands you promote” because of the trust they have built with the podcast.

Aligned to this is research from US-based agency Midroll (see infographic, below) supporting the power of brand recall in podcast ads. A survey of more than 11,000 podcast listeners found that a whopping 90 percent said they listen to the ads of the target brand, and don’t skip. 

As Thomas at Carat neatly summarises: “Think of it as the radio, with fewer competitors, targeting a specific demographic and with more engaged listeners.”

The obstacles

While that’s probably enough extolling of the obvious virtues of podcast advertising, it’s now time to address the colossal elephant in the room: it isn’t attracting very many advertisers. Despite Serial’s stratospheric success, podcast maestro Ira Glass, who helped create it, was still found shilling for the podcast community at this year’s Cannes Lions festival.

If the most successful podcast to date in the industry’s most mature market had a hard time attracting ad spend, then in Asia it is currently nigh on impossible. Leong says that other than his wife’s startup, Ideal Workspace, he has no official advertisers, instead running on a subscription model.

It would be easy to bash marketers and advertisers for being too risk-averse with a new medium. But it would also be unfair. There are significant issues to overcome in Asia for podcasting to grow enough for advertisers to take serious interest.

"Unlike programmatic display and video, there do not seem to be many global podcast ad networks that allow dollars to flow efficiently"
— Ken Mandel, president of innovation and commerce at Publicis Media APAC

The first is scale. As Leong at Analyse Asia readily admits, there just aren’t enough Asian podcasts for Asian consumers that brands could target. With so many different languages, cultures and identities, one podcast cannot cover all markets, like they do in the US. “I should be able to attract sponsors and advertisers,” he said. “But the different geographies throughout Asia may not be effective for them, unless it’s a global brand.” He adds that the lack of Asian podcasts means there is far less cross-promotion than in other markets, which has helped the industry grow. For an advertiser, a small market is an understandable issue.

“The diverse and fragmented digital ecosystem and geography certainly does not help Asia’s case,” says McBride at IPG Mediabrands. “More competition would not be a bad thing as it tends to drive creative and strategic thinking to help brands break away from the pack, experiment and earn greater value.”

It’s something of a vicious cycle at the moment. A lack of Asian podcasts means a lack of awareness of the medium in Asia, which inevitably means fewer listeners for advertisers to reach. This issue trumps many positives about podcasting, particularly in Asia. Mandel at Publicis is a strong advocate of the medium’s self-segmenting consumers who are easier to target, but the main question for advertisers is “can I reach a large enough audience to make this investment worthwhile?”

Progress in Asia is slow, but podcasts may be on the rise in China

 

Finally, distribution is difficult, as Leong’s experience highlights. “I have fought tooth and nail to get Analyse Asia onto aggregators such as TuneIn and Stitcher. I have tried to get onto Spotify but to no avail. If these aggregators go global, the opportunity for distribution will be great.”

Mandel makes a similar point from the advertiser standpoint. “Unlike programmatic display and video, there do not seem to be many global podcast ad networks that allow dollars to flow efficiently,” he says, noting that there are a couple of “niche players” that don’t have the scale compared to video and display.  

So it’s clear that there are some serious challenges for the Asian podcasting industry, and podcasting in general, to overcome before advertisers are knocking down their doors. Thomas at Carat, while excited by the prospect, admits that the Asian market “will take a while to catch up”.

But progress, however slow, is being made. Leong says he is seeing “a plethora” of new podcasts being created in China, for example. More broadly, just last month WPP announced a US$5 million investment in US-based global podcasting company Gimlet Media, a statement that the ad world is getting on board.

The fact remains that this is a medium in its ascendancy, and those that keep a close eye on it could benefit significantly if they get there ahead of everyone else.

“As marketers we are all on the look out for new methods of communications, the pioneers being a number of steps ahead,” says McBride. “But there is certainly time and space for greater reputation building for podcasting and audio content.”