Podcasts are moving towards being accessible to the masses and most in the industry are celebrating. But should we be? Historically, podcasts have been synonymous with affluent, niche, and otherwise unreachable audiences. They’ve also been synonymous with iOS, the Apple Podcast app, and iTunes. These two core characteristics may be in jeopardy as podcasts move outside of the Apple ecosystem towards active and eager participants like Spotify and Google, as well as unknown activists that emerge from the woodwork, like Pandora.
15% of the estimated 73M (Edison Podcast Consumer 2018) monthly podcast listeners have a household income of $150K+. The national average of people with that income level is 11%. Moreover, 20% of monthly podcast listeners have household incomes of $100k-$150k, as opposed to the national average of 14%. So it’s safe to say that as a media type, podcasts certainly over-index against the highly affluent, closely correlating with that of iOS users.
According to ComScore, iOS users have a median annual household income of $85k per year, which is 40% higher than Android users, who net out at around $61k per year. As such, performance advertisers who value higher lifetime value customers ought to take note at what could be a seismic shift in podcast audience composition.
Many of the most active brands in podcast advertising rely on the potency of affluent consumers in order to hit growth goals at an efficient Cost Per Acquisition or high Return on Ad Spend. While still less expensive than their mainstream counterparts, industry disruptors like ZipRecruiter (#1), Squarespace (#2), and Quicken (#3) all benefit from above-average income in their target consumer (determined by a relatively high ticket price or product value). As any podcast listener or marketer knows, for every ZipRecruiter there’s an Indeed, and for every Squarespace there’s a WordPress. In other words, these higher-priced items all have competitors pursuing the same type of audience, which effectively floods the market and consolidates spend amongst companies looking for the rare, high-end consumer for which podcasts are known.
Apple has virtually always been the dominant Podcast distributor to consumers. While authoring the term “Podcast” probably helped, a primary driver is iOS 8. Released in September of 2014, this build of Apple’s mobile operating system changed the Apple Podcast app, from a model to be downloaded in the app store, to a pre-loaded application, shipping on every single iPhone. While access is still misunderstood and many people don’t know what a podcast even is (36% report no awareness of the term), this moment arguably caused a near-doubling of the amount of monthly listening. From 2014 to 2018, monthly listening went from 15% of the population to 26% (A12+). From that statistic alone, it seems that iPhone access had something to do with the increase in listenership.
A case study for the potential dilution of the podcast audience can be seen by none other than Google, as they are making a recent and significant play in the podcast distribution space. In June, they announced that they would be releasing a first-party, native app on Android, as opposed to making the access process even more confusing by forcing consumers to go through Google Play Music or third-party apps. Their goal is to “double worldwide listenership of podcasts overall”. While that sounds great for the overall development of the space, after looking at the ComScore data above, we could be nearly halving the high index of affluence in the podcast space.
Hypothetically, if Google and others are successful in their mission to add more generally representative audiences, the direct response business will have to normalize in pricing in order to keep performance at sustainable levels—not to mention to continue increasing the expected revenue for the space. For this reason, it would be wise for publishers to keep an eye on what platform-level distribution looks like for their properties, and accurately forecast where they’ll want to proactively cut CPMs in order to accommodate for the lower audience potency.
Publishers won’t eagerly rush to this solution, but if the space really does double from this single effort, the necessary and sustainable (for performance marketers) CPM shouldn’t completely outstrip the audience growth. In other words, don’t panic; publishers will still make more money in terms of gross revenue.
This may sound like an aggressive call from the perspective of a marketer, but as audiences shift, so too will dollars. As podcast advertising is predominately performance-based, dollars will quickly move away from networks who don’t fairly and rightly accommodate for the mismatch between mainstream, not exceptionally affluent audiences, and discretionary, high priced products. It’s worth noting that as audiences grow to more closely represent a general market, brand-focused advertisers with little regard to direct ROI may be able to sustain premium CPMs. That said, there will always be a significant segment of the market reliant on direct response marketers.
For advertisers, it’s important to mind the audience shift and continue to expect more aggressive rates from your publishers, partners, and agencies (as always). Moreover, it may be time to ask for more information when it comes to analyzing potential media investments, for example: Are you IAB compliant? Where does your podcast get listened to the most (iTunes/Apple Podcasts, Google, Spotify, etc.)? These investigative questions that transcend price and hosts’ social media following will become a determining and predictive factor in the potency of the asset and act as critical information in assessing any potential media investment.