Podcast ad revenue will more than double by 2021

29 June 2018 Consulting.us 5 min. read

Podcasts have taken the digital world by storm, generating ad revenues in the US which surpassed $300 million last year. New research from PwC and the IAB projects spectacular year-on-year growth, leading to a market worth some $660 million by 2020.

Many have lamented the quiet death of the novel and newspapers as a consequence of modern technology. But, although it comes in a digital guise, podcasting is in some sense a more traditional method of providing information and entertainment. After all, humans were listening to one another for millennia before the invention of the printing press.

Liberated from the visual grip of a book or screen, podcast consumers can drive, cook, commute, shop and exercise while listening to a show they can freely download and pause at will. They have a huge range of choice – from political talk shows, to cultural discussions, sports updates and business news – that is comparable to the web and comes in an easily downloadable format with simple subscription options.

Advertisers have been quick off the mark, paying podcasters to promote their products, typically at the start of the show, in a non-intrusive manner. Podcast ads are also extremely focused – right-wing talk shows are flush with ads for survivalist equipment, while healthy eating podcasters are courted by juicer makers and organic chocolatiers.

Small wonder that US ad revenue from podcasts shot up to an estimated $314 million in 2017, almost double the roughly $170 million generated in 2016. The figures come from Big Four accounting and consulting firm PwC and the Interactive Advertising Bureau (IAB), which have released their second annual Podcast Ad Revenue Study.

The survey – which combines both self-reported revenue and estimates garnered from market analysis – makes happy reading for advertisers. Revenue is projected to top $400 million this year, break the $500 million barrier in 2019, and edge closer to $700 million by the turn of the decade. 

US podcast advertising revenue is expected to grow

Better technology is one catalyst for the rapid rise in revenue (projected to grow 111% between 2017 and 2020) says Anna Bager, an Executive Vice President at the IAB. Smart speakers have contributed to growth in audience and advertising investments as well," she says.

"Voice and audio are central to interactions with everything in the home from smart speakers to appliances, smart TVs, and home audio systems. Over 70% of people with a smart speaker listen to more audio."

Youth is also on the podcasters’ side, with one Reuters survey finding that half of all under-35s tune in regularly. “The growing trend toward ‘anywhere and everywhere’ media engagement has created tremendous opportunity for digital media, of which podcasting is a significant component,” said David Silverman, Partner at PwC US.

“Whether at home on a smart speaker, at work on a PC, or somewhere in between on a mobile device, more and more Americans are listening while they live, providing a robust podcast platform where advertisers can connect with today’s consumers.”

Revenue by Content Genre – 2017

From an advertising perspective, not all podcasts are created equal. PwC/IAB research shows that, by category, Arts & Entertainment; Technology; News/Politics; and Business podcasts, together generate more than half of all revenue. Arts & Entertainment – which can include anything from celebrity podcasts to theater reviews – commands the juiciest share of the pie at 16.8%.

Comedy and education also provide their fair share of total revenue at 10.6% and 9.6% respectively. Medicine, Fiction, Games, and Children’s Programming are the least profitable domains for advertisers, who PwC also found greatly prefer deploying ads that are related to the podcast content.

Revenue by Industry Category – 2017

Broken down by industry category, Financial Services; Retail; Arts & Entertainment; and Business-to-Business captured a combined 59% of all revenue. Financial Services was the outright leader, generating 18% of the total as banking and insurance ads permeate the podcast landscape.

Telecommunications, Automotive, ecommerce, Corporate and Food & Beverage ads also perform well. Languishing at the bottom of the table are Pharmaceuticals and Tourism products, which suffer from a content disadvantage, particularly among the young.

Small potatoes

Although podcast ad revenue in the US is expected to reach $660 million by 2020, an almost tenfold increase on just a few years ago, it will still occupy a relatively small share of the nation’s digital advertising goldmine. Total digital ad revenues are expected to top $100 billion in 2018.

Recent analysis from FTI Consulting projected US online ad spending to reach $123 billion by 2021. In the consulting firm’s estimation, digital advertising will soon account for an 80% share of the entire ad industry, up from around 36% at present. Between them, Facebook and Google control around 70% of the current digital advertising market. 

The ad industry faces disruption on another front – the consulting business. As evidenced by Accenture Interactive’s bold move into the digital advertising space, consulting firms have spotted vulnerabilities in their old rivals and, after years of helping clients move their advertising in-house, are now getting directly involved in buying ads themselves.