Significant commercial advertising revenue opportunity for podcasts

As with generic radio, podcasting allows for generic advertising and sponsored content. Whilst ‘banked-in’ ad content (permanently integrated in the audio file) is an option, what digital audio offers above analogue is undoubtedly the ability to dynamically insert content.

Dynamic insertion of ad content means the ad content can be added or removed from podcasts rather than being hard-wired. The hosting provider builds multiple versions of the audio files (with all possible advertising variations) and serves the appropriate file to the appropriate user upon receipt of a podcast file request. New ads are inserted within the content on-demand, enabling precise scheduling, targeting, and delivery reporting. Advertisers can choose to target podcasts specifically based on content, geographic location, and other criteria. Dynamically inserted ads can be served across a range of podcasts, and targeted to a particular audience, time period, or reach and frequency objective.

The standard ad units available on podcasts are pre-rolls, mid-rolls, and post-rolls. The availability and number of each will vary depending on the length of the content. As the industry evolves, new ad formats are being developed beyond these traditional ad types.

In 2017, ad revenues from podcasting grew at a compound quarterly 19% to an annual total of $220m (IAB Podcast Ad Revenue Study, June 2017). Whilst this currently represents only 1.2% of generic broadcast radio ad revenue (at $18bn), it’s growth-rate is unheard of in audio.

In South Africa, radio advertising spend sits at approximately R6.2bn. Assuming a similar pattern, 1.2% of that media spend is a hard-to-ignore R719m opportunity. Granted, as listeners move from analogue to digital listening, the advertising revenue will move from generic radio to digital audio, rather than increase, if not for a little lag as media buyers and clients catch up with the trend.

However, just as the opportunity for listeners of podcasts is opened up by the incredibly long tail, so is the golden opportunity for advertising revenue. Just as Google and Facebook have brilliantly leveraged the long tail of smaller advertisers by bringing down the transaction cost, digital audio advertising platforms which are available through podcast hosting providers opens up audio advertising to a huge, untapped market.

Of the 4,221 radio advertisers in South Africa, the bottom 80% of advertisers spending, who all spend under R1m per year, spend a combined R738m (12% of the radio media market). Growing this portion of the revenue pie will enjoy dramatic acceleration through easier-to-use ad platforms and lower cost to entry.