Podcasting — as the Wall Street Journal recently put it — is “on a tear.”
Already experiencing high growth before 2020 and the onset of the pandemic, it has exploded over the past year. Today, 41% of the population over 12 years of age are monthly podcast listeners. This year, the podcast industry is set to bring in $1 billion in ad revenue for the first time ever.
Not surprisingly, streaming services are jockeying for the best podcast market position, competing for exclusivity rights and listener share that will only get more profitable as podcasts continue to gain momentum.
One of the biggest players in the space is Spotify. We sat down with a former Spotify design manager who worked with the company’s ads and podcasting teams to talk about the state of the industry, why streaming services are so podcast-focused right now, and how Spotify might win the market over behemoth competitors Apple and Google.
- Our source believes we are now at the height — the “golden age” — of podcasting.
- Spotify’s landmark 2020 deal with exclusive rights to the biggest podcast in the world, The Joe Rogan Experience, has powered their exclusivity strategy and attracted new listeners.
- According to our source, Spotify is the best in the business when it comes to audio ads with much potential for revenue growth in that area.
- Better podcast discovery and hybrid audio-visual content are two areas of focus for the future at Spotify.
- Spotify is projected to surpass Apple by the end of 2021 for most monthly podcast listeners.
The height of the podcast trend?
Our first question was about where we currently sit on the trajectory of the podcast industry, and our source answered without hesitation:
“I’d say right now is probably the height of it. I think right now is probably the best time to try and start a podcast and monetize . . . it’s the golden age of podcasting where anyone who has thought about creating a podcast can easily create one.”
Statistics support this observation. In 2018 there were just over 500,000 podcast shows and 18.5 million total episodes. Since then, the number of podcast shows has quadrupled to more than 2 million and there are 48+ million total episodes.
It seems there is no time like the present for creators to get in on the podcast trend, and streaming services are paying attention like never before. Post pandemic, the use of associated services such as videoconferencing are also on the rise, enabling companies such as Zoom to rise to the leader spot with some smart marketing.
Spotify’s exclusivity strategy
Spotify’s podcast growth strategy has been focused on exclusivity rights.
“Spotify’s strategy is mainly to build audience, so looking for the biggest podcasts that are available out there and getting exclusivity with them so that they can build up the audience on Spotify for podcast listening.”
If this is their main goal, then Spotify struck gold in 2020 when they signed a multi-year, $100 million deal with Joe Rogan, creator of the number one podcast in the world: The Joe Rogan Experience.
According to our source: “It was a very calculated and well-worth deal for Spotify.”
Interestingly, TV streaming services like Netflix and Hulu have increasingly approached the exclusivity strategy by producing their own content. Our source sees this strategy as too risky for podcasts. Here’s why:
“The normal rate of producing a pilot which may be three to five episodes is going to cost a little over $100,000 dollars . . . on top of that, you never know if it’s actually going to pick up and gain popularity. There could be a lot of money spent around marketing and time to build up a podcast from scratch.”
“[It’s] a lot more cost effective to buy exclusive rights to a certain podcast for a certain amount of time. In the case of Spotify, I’m not sure if monetization is the main goal of the exclusivity. It’s more of a long play of gaining that audience and then using the normal methods of either features or subscriptions or ads on the platform to then monetize on that audience.”
The ad potential
Perhaps the biggest opportunity within those “normal methods” is with advertising. Podcast advertisements are not targeted in the way other digital ads are. They’re read by the podcaster at the start of the episode and periodically throughout — an overall manual process.
But our source doesn’t think it’s all bad.
“The susceptibility of people listening to ads on podcasts is a lot easier. It’s less intrusive than when they’re listening to music. When you’re listening to music, there is much more of a shift in mindset when an ad plays, whereas it’s less the case when a podcast is playing.”
There are also challenges in targeting podcast audio ads that our source sees as incomparable to monetization some of the big players achieve from display ads:
“I don’t think you’re going to be able to compare apples to apples, especially in regards to Facebook or even Google on the way that they monetize on ads. They have a lot more volume. The metrics I feel are a lot easier for them to calculate, whereas the effectiveness of audio ads is a little bit more difficult.”
“No one is really doing audio advertisement as well as Spotify is. They’re probably going to own the space in terms of audio ads . . . My suspicion is as the audience size increases for podcasting, there will probably be a proportionate increase in the ad spend or the revenue gained when it comes to ads for Spotify.”
What we’ll see in the future
Better discovery will be a priority for Spotify as its podcast library and listenership continue to grow. While Spotify is already looking for innovative ways to make podcasts more discover-friendly, it’s likely they’ll also pull from their music discovery methods and use best practices for recommending podcasts to users.
Another exciting area Spotify is exploring is a sort of hybrid form of content, bringing audio and visual together for a new kind of streaming experience. They could also add smart social media innovation on top of that, taking a leaf out of Tinder’s book.
“I think the exciting thing in the potential of Spotify is that they might spawn a new format altogether where it’s a mix of listening and visual, which I know that they’re continuing to explore with some of these new formats that are coming out,” our source shared. “I feel there could be a good mix of that happening where it really enables creators to make these new forms of content that’s going to be exclusive to Spotify.”
Spotify’s focus on growing podcasts and their landmark deal with Joe Rogan have both paid off. While it hasn’t happened just yet, market projections forecast that Spotify will surpass Apple’s monthly listenership and gain the largest share of the podcast market, achieving an estimated 28.2 listeners per month to Apple’s 28 million even.
The gap is forecasted to widen in the next couple of years, with Spotify at 37.5 million monthly podcast listeners by 2023 to Apple’s 28.8 million.
Right now, podcast listening accounts for 20% of Spotify’s total listening hours, a reflection of the emphasis the platform has put on this area of growth. Even better for them, podcast listenership has not cannibalized music listening hours at all according to our source, instead only adding to their total user listening hours.
So does our source agree that Spotify will be the podcast winner at the end of the day?
“Yeah, for sure. I do not think it would be unheard of for Spotify to easily take the majority share in terms of listenership.”
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