2018 Forecast: Podcast Ads, Metrics, Revenue and Stitcher’s Best Year Yet

“At the end of 2018 none of the objections we get from brands will be based on measurement.”
-Lex Friedman, Midroll Chief Revenue Officer

Behind every hit podcast is the revenue that fuels production and the platform that delivers it to listeners. This second part of our 2018 forecast drills down into advertising and metrics–and gives a hint to what’s in store for Midroll’s Stitcher platform.

Big Brands Move In To Stay

Most podcasting would not be possible without advertiser support, and advertising investment has increased across the medium broadly over the past few years. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers recorded a 72% jump in podcast ad revenue from 2015 to 2016, and an even bigger 85% increase from 2016 to 2017.

Historically, however, Fortune 500 brands have been hesitant to get into the mix. But in 2018 Midroll chief revenue officer Lex Friedman predicts bigger brands, “will make podcasts a core part of their marketing spend.” Evidence of this in the Midroll network includes relative newcomer Procter & Gamble with advertisements booked for brands like Gillette and Mr. Clean.

A hurdle for some brands has been trusting a host with their messaging. But studies can help. “What’s nice is that we’re doing research to show them how well the ads work, and the ad reads consistently demonstrate that hosts can stay on-brand,” Lex explains.

With podcasts, brands are reaching people who skip ads elsewhere or who can’t be reached with other media. They don’t watch television, they DVR shows so they can skip commercials, or they’re consuming subscription OTT content, like Netflix.

More Metrics Will Flesh Out the Measurement Picture

Advertisers of all stripes rely on metrics to make buying decisions and measure campaign performance. The last quarter of 2017 saw two major events in this arena. In December Apple released the beta of its Podcasts Analytics, providing insight into overall playthrough of individual episodes. In the same month the IAB released version two of its “Podcast Measurement Technical Guidelines” which specified a new standard to enhance the accuracy of download stats.

Because of the way podcast episode files are served to client apps (like Apple Podcasts or Stitcher), those apps may make several requests for the file to complete just one download. Previously, each podcast hosting service employed a proprietary method for setting a time window inside of which multiple requests are aggregated and counted as a single download.

The new IAB guidelines set a voluntary industry standard window of 24 hours, longer than nearly every other methods in prior practice. 

As the industry comes into compliance with this recommendation, Midroll implemented a 60-minute window standard across its roster of partner and owned-and-operated podcasts. This standard significantly increases the accuracy of download counts compared to the 5-minute window still in use by many networks. 

Across the industry the download reports for some shows changed for podcast hosts and networks that shifted to longer windows, with some moving downward. In general, shows with longer episodes – which might require more requests to download – were more affected. 

Despite some disruption, neither of these changes worry Midroll CEO Erik Diehn. “Even if you strip out some earlier inflation, audience growth has been strong,” he says.

“By the end of 2018, we’ll be able to sell on a listen basis,” Lex predicts. That means Midroll will be able to report to advertisers how many times an individual ad spot was played. “We’ll be using Apple’s data, and data we can only get from (Midroll’s listening platform) Stitcher. But I don’t think this will dramatically change the industry.”

Reporting from Stitcher, in particular, will be critical. “We can’t say that Apple listeners are like podcast listeners on other platforms,” Friedman says. “So, we’ll be able to compare listening behavior to Stitcher. I’ve long believed that Stitcher listeners are different, and now we’ll know.

“At the end of 2018 none of the objections we get from brands will be based on measurement.”

Painting a Broader Revenue Picture

There are also growing opportunities to diversify revenue beyond advertising. “Last year we created a new platform for selling merchandise across podcasts,” Lex explains. “We’ve seen success beyond t-shirts and coffee mugs with both our owned-and-operated shows, as well as others in the Midroll network. For example, we have a magnet set for ‘Hello from the Magic Tavern,’ enamel pins, stickers, laptop decals–all the stuff people want so they can celebrate their favorite podcasts.”

The benefit of PodSwag for both podcasters and their audience is that high-quality items are kept in inventory. So, items can be shipped more quickly and sales are more automated. A key part of this strategy has been the hire of an experienced merchandiser from the fashion industry who will lead this division to continued growth in the coming year.

Sharing a Premium Opportunity

Revenue diversification extends to subscription content with Stitcher Premium. The service delivers to customers ad-free original podcast series, along with archives and bonus episodes of established series like “Comedy Bang! Bang!” and “WTF with Marc Maron,” and other high-quality audio programs, like comedy albums and BBC audio dramas.

As it continues to grow, proving that audiences will pay for premium content, so does the opportunity for more podcasters to broaden their revenue base with subscription income. “We want to give content partners another source for incremental revenue,” explains Stitcher GM Todd Pringle. New partners will be able to offer windowed or bonus episodes, back catalog archives, or ad-free content through Stitcher Premium. Shows that have already taken advantage of this model include “Doug Loves Movies” and “Call Your Girlfriend.”

Investing in Infrastructure

For Stitcher, “2018 is going to be a significant year of investment in the platform,” Todd says. “We haven’t had that in a long time.”

That investment has already paid dividends, with the launch of an Alexa skill and a refreshed iOS app in the last quarter of 2017. On the agenda are a new Android app and many other platform updates.

Pringle sees the rapid adoption of smart speakers as an important growth sector for podcasting. “Even the in the early days of Stitcher,” Todd recalls, “when we surveyed people where they listened, I was surprised at how many listen in the home.”

People who get an Alexa or Google Home are continually seeking out new ways to use the technology. “Podcasting is a natural fit, and much more convenient than hooking up your phone or pairing it.”

With platform investment combined with more marketing and content, “for the first time in a long time–maybe ever–I feel like we’ll have all these things working in concert,” Todd says. “It’s going to be the best year yet for Stitcher.”

Podcasting On Track To Replace Talk and Satellite Radio

In fact, 2018 is on track to be the best year yet for podcasting as a medium and industry. According to the IAB and PriceWaterhouseCooper industry revenue grew an explosive 85% from 2016 to 2017. Friedman believes “there is a lot of explosive growth left. That kind of growth is not behind us.”

As the audience broadens and producers create more top-quality entertainment and news content that appeals to an increasingly mainstream audience, the future is looking brighter than ever. Looking even further into the future, Diehn maintains podcasting is going to replace talk radio and SiriusXM in the next 3 – 5 years.

“I wasn’t certain of this a few years ago,” he notes, “but now I am.”

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