Podcast ad revenue will more than double by 2021

29 June 2018 Consulting.us

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.


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Google topples Apple to take top spot on BCG's list of innovative firms

28 March 2019 Consulting.us

After ranking first on strategy consultancy Boston Consulting Group (BCG)’s top innovators list for 13 years, Apple has finally been knocked off the top spot, landing at third place.

Google usurped Apple’s crown, and Amazon rose to second place on BCG's ranking of the top 50 global innovators. Microsoft and Samsung rounded out the top five, with Netflix, IBM, Facebook, Tesla, and Adidas filling out the top 10. BCG’s ranking was based on a global survey of more than 2,500 senior innovation leaders.

Tech firms dominated the top end of the innovators list. Traditional industries, however, still accounted for more than half of the top 50: Adidas, Boeing, BASF, Johnson & Johnson, and DowDuPont all ranked in the top 15.

The rising importance of digital technology – including artificial intelligence (AI), platforms, and ecosystems – was the central touchpoint of BCG’s survey. Top innovators are increasingly embracing AI in particular to develop new products and services, and to improve the internal innovation process itself.

"Digital technology and external innovation have become watchwords," Ramón Baeza, a BCG senior partner and the report's coauthor, said. "All of the top 10 companies – and many in the top 50 – use AI, platforms, and ecosystems to enable themselves and others to pursue new products, services, and ways of working."

2019 Most Innovative Companies

Platforms provide a foundation on which companies can develop their business offerings, with Amazon Web Services (AWS) and Microsoft's Azure offering some of the leading cloud-based platform services. According to BCG, ecosystems go a step further, pulling together technologies, apps, platforms and, other services to build an integrated solution. Android and iOS, for example, are now a complex ecosystem of telecoms, phone manufacturers, and app developers. AI, meanwhile, simulates human intelligence to achieve groundbreaking new technologies such as self-driving cars and "smart" digital assistants.

The top firms on BCG’s list extensively use AI, platforms, and ecosystems. Google has invested heavily into AI, which is apparent in the company's smart speaker Google Home, the accurate autocompletion of sentences in Gmail, or in its autonomous driving venture. Android, meanwhile, is a truly expansive ecosystem.

Amazon utilizes the cutting-edge Alexa AI voice technology as well as the widely used AWS platform. Apple offers Siri and iOS.

Of survey respondents, 90% said their firms are investing in AI, with more than 30% expecting it to be the innovation area with the highest impact on the businesses in the next three to five years.

Just under 20% of respondents said their companies were strong innovators and above average in AI innovation (what BCG terms "AI leaders"). Among the subgroup of AI leaders, 94% said they see AI as important to their companies’ future growth, as opposed to 56% of AI "laggards" (who rate their AI capabilities as below average).

"AI will have a significant impact on business processes, but its biggest potential lies in developing new products and services that can yield major revenue streams over time," Michael Ringel, a BCG senior partner and the report's coauthor, said.

Which areas of innovation are you actively targeting?

McDonald’s (21st on the list) is using AI algorithms on digital menus that change according to time of day, restaurant traffic, and the weather. Philips (29th) last year launched an AI platform that allows healthcare industry workers to access advanced analytics that curate and analyze healthcare data.

AI is already unlocking value for advanced users: 46% of AI leaders said AI-enhanced products and services represented 16% of sales, versus 10% for laggards.

In a world of platforms and ecosystems, the BCG report found partnership models are gaining steam. Strong innovators have upped their partnership usage from 2015-18, with incubator use rising from 59% to 75%, academic partnerships from 60% to 81%, and company partnerships from 65% to 83%.

Platforms and ecosystems help facilitate innovation, while expanding reach and collaboration, allowing for stronger, multiparty solutions. “Not all ecosystems are alike, however. They have different types of glue that bind their participants. Money is one type, of course, but knowledge, data, skills, and community can be equally important," Florian Grassl, BCG partner and report coauthor, said.

Four companies on 2018's top 10 list were also in the top 10 in 2005: Google, Amazon, Microsoft, and IBM. BCG deems these companies “serial reinventors,” which sets them up well for continued innovation dominance. Google continues to revise its offerings and algorithms, Amazon disrupts new categories and builds new services, and Microsoft and IBM have successfully transitioned into cloud-based services.

"The tools and technologies of innovation evolve,” BCG’s report states. “The basic orientation toward change – never being satisfied and always being willing to reinvent oneself – remains part of some companies’ lifeblood.”