Everything Brands Need to Know About Podcasts (but Were Afraid to Ask)

Earlier this year, we asked if podcasts are the next big thing for sponsored content. Judging by the surge of interest from brands and media companies alike, it seems like the answer is yes.

This February, Slate Media launched a podcast network, Panoply. Other publishers such as BuzzFeed, Vogue, and Esquire have also created their own shows. As for brands, large enterprises like Wells Fargo and startups like Slack now have podcasts. And while podcast ads used to be dominated by web-based companies such as Squarespace and MailChimp, avid podcast listeners have started hearing ads for more established brands like Ford and HBO.

Heck, even Alanis Morissette now has her own podcast.

With podcasts booming, it’s easy to get caught up in the trend. But as with all new marketing mediums, it’s crucial to understand the landscape first. In this report, we’ll examine:

1. How brands create podcasts of their own.

2. How brands advertise on the top 100 podcasts and measure the ROI of those efforts.

3. The promising but still uncertain future of podcasting at large.

Branded podcasts are having a moment…

General Electric has just proven that it’s possible for branded podcasts to compete with more mainstream shows. In November, GE’s The Message, a sci-fi podcast, took only six weeks to climb to No. 1 on the iTunes top podcasts chart, overtaking mainstays like Serial and This American Life.

Most branded podcasts don’t have that level of popularity, but they still attract an audience. The McKinsey Podcast, from management consulting firm McKinsey & Company, reached No. 31 on the iTunes chart when it launched this November. Likewise, The Distance, a new podcast from Basecamp that profiles unique small businesses, has been building momentum. While its popularity on iTunes is currently limited to Germany and Italy, the show does have a five-star rating on iTunes from 61 reviewers.

These are just a few examples, but it’s clear that given the right direction, brands are capable of producing high-quality podcasts and attracting a loyal audience.

… But most podcasts die in six months

Even if some brands have pulled it off, creating original audio content isn’t as simple as it looks.

“It’s hard to produce good audio,” said Steven Goldstein, founder of Amplifi Media, which helps companies with digital audio strategy. “Many brands get into it thinking that it will be fun, interesting, or cheap. Then they quickly learn that it’s hard to create effective audio on a consistent basis.”

When Slack debuted Variety Pack, for instance, it took the company two months just to produce the first episode. Even established brands like General Electric can find it difficult. GE’s semi-fictional Pivot podcast was originally intended for a weekly release, but given how labor intensive it was to produce, new episodes now come out every other week instead.

Changing a podcast’s schedule is one thing, but what if a project completely runs out of steam? “There’s a lot of podcast creation going on, but the mortality rate on podcasts is quite significant,” Goldstein said.

This high mortality rate is reflected in a study by sociologist and podcaster Josh Morgan, who found that most podcasts do not last more than six months. This is a sobering reminder for brands that think podcast production is as simple as turning on a mic in a conference room and getting a couple of employees to talk.

Ad space is limited

Brands that don’t want to create their own podcasts but still want to get in on the podcast boom currently face a challenging sponsorship market. Companies that buy podcast ads are battling for limited ad space on the most popular shows.

“Our inventory is very, very finite,” said Lex Friedman, executive vice president of sales and development for Midroll, a podcast advertising network. “WTF with Marc Maron or Comedy Bang Bang each have two pre-roll spots, two mid-rolls, and a post roll—and that’s it. When those spots are taken, no new spots are added into the shows.”

This is true not just for Midroll’s shows, but for popular podcasts in general. In fact, five ad spots is more than most shows typically offer.

I analyzed the ads in the top 100 podcasts in iTunes.[note]The top 100 iTunes podcasts as of August 27, 2015, listening to their most recent episode at the time. Data can be found here.[/note] Thirty of the top 100 podcasts don’t have ads, but among those that do, the median ads per show is three. Most of these ads are evenly distributed at the beginning (pre-roll), middle (mid-roll), and end (post-roll) of each show.

These limited spots have been filling up faster now that there’s increasing interest in upfront ad sales.

This September, the Interactive Advertising Bureau (IAB) held the first Podcast Upfront Showcase, where podcast networks and other media organizations presented their roster of current and upcoming shows to advertisers and marketers. Presenters included Panoply, WNYC, NPR, and Midroll.

Before the showcase, Midroll had already been seeing a dramatic increase in upfront ad sales. “We started selling upfront ads two years ago, and now we’re doing ten times the dollar amount for upfronts this past year, for 2014 to 2015,” Friedman said.

Some of the network’s most popular shows, such as WTF with Marc Maron, which averages roughly 450,000 downloads per episode, have already booked more than a quarter of their available slots for 2016.

“This means that more and more advertisers are discovering that this is a really compelling and successful and effective ad delivery mechanism,” Friedman added.

Always go for repetition

For brands that can’t secure an ad slot in one of the most popular shows, there’s good news. According to Friedman, the critical factor in podcast advertising is repetition. Rather than getting a single expensive spot in a high-profile show, it’s better for brands with limited budgets to book recurring ads.

“I’d much rather see my advertisers spend on shows where they have enough budget where they can get some repetition, running ads multiple times and multiple weeks in a row,” he said, “because that’s where we really see success happen.”

In the podcasts I sampled, ads for Squarespace, MailChimp, and DraftKings are often mentioned twice in the episodes they appear in. From Friedman’s perspective, not only do these repeating ads work, they’re also a good sign for other brands that these spots are working.

“None of these companies are willing to throw good money after bad [ads],” he said. “They’re all continuing to invest in podcasts because they’re happy with the results they get.”

A great opportunity for creative ads and integrations

If brands want to do more than advertise on a podcast but can’t invest in creating their own show, there’s a happy medium: sponsoring native ads that integrate into a show’s format more than a typical live read.

In a typical live read—which makes up over 69 percent of podcast ads—hosts mention the brand name and often talk for 20 to 60 seconds about the benefits of the brand’s products and services. In much shorter spots (labeled “Mention” in the chart below), brands are only mentioned by name in a simple tagline. These mentions are often for underwriters or nonprofits that help fund the show.

The more creative ad integrations are native ads, which sound like a natural part of the podcast (except, of course, that the host explicitly states that the brand is a sponsor.)

For example, in an episode of Helen Zaltzman’s The Allusionist, a podcast about linguistics, Zaltzman mentions MailChimp, followed by a word randomly selected from a dictionary. In this episode, the word is “imagineer,” and the host reads the definition, adding some light commentary. We can even hear her turn the pages. If not for the brief mention of MailChimp, this segment would blend in with the rest of the episode.

There are also ads that blend live reads with native formats. In these cases (labeled in the above chart as “Live Read with Content”), the hosts read their usual script about a brand’s features and benefits, and then add some additional native content.

Based on the data I’ve gathered, it appears that Squarespace, MailChimp, and Blue Apron are the three brands that produce the highest number of “creative” spots that blend live reads with native ads.

Given the length and the native structure of these ads, it’s no surprise that they tend to appear in mid-roll spots, which are also often the most expensive. In these prime spots, sponsors can get more airtime—30 to 60 seconds—as well as more engagement, theoretically, since the slot is right in the middle of the show.

“Mid-roll is the highest cost spot because it’s two to three times longer [than the other spots],” Friedman explained. “The pre-roll costs less because it’s shorter, and the post-roll costs even less because it’s at the end of the show.”

There are also other creative ways that a brand’s sponsorship can be woven into a podcast. According to Friedman, this is where custom integrations come in, allowing advertisers to sponsor special episodes or segments of a show.

“The episodes are editorially independent, but the topic is supplied by the advertiser, and the host discloses this to the audience,” he said. “Listeners who aren’t interested in the advertiser still get an episode of a show they love, but it’s also compelling integrated advertising for the brand at the same time.”

This bonus episode of the Cracked podcast, for instance, which was co-produced with GE, looked at “Why You May Live To 150 And Never Feel Older Than 30.”

While these creative ads and custom integrations are exciting for brands that want to do more than just scripted reads, both the brands and the podcast producers should be proactive when it comes to transparency—just like they should be when sponsoring content in other media.

Tracking the ROI of podcast ads

How do brands track if their podcast ads are worth it? From the ads I sampled, direct-response methods were most common; 30 percent of ads had unique tracking URLs, and 21 percent used unique coupon codes. On Bill Simmons’s BS Report, for example, live reads for Simply Safe direct people to go to SimplySafe.com/BS to receive a 10 percent discount. In very few cases (3.8 percent), both coupon codes and tracking URLs were used in the same ad.

These direct response tactics are no surprise since direct response marketers were among the first advertisers to explore the space.

“To our delight, they really proved the model,” Friedman said. “Performance-focused advertisers are really looking spot by spot. They really showed us, before we were certain, that people really listened to these ads and that they respond to them.”

What about the other half of the pie, the ads that don’t use tracking URLs or coupon codes? It’s likely that these brands and marketers are tracking overall brand lift or are using some other metric—just like they would for billboards or television spots.

In the case of Serial‘s famous MailChimp ads, which didn’t use tracking URLs or coupon codes, a listener survey revealed that 81 percent of listeners correctly remembered a sponsor. Of this group, 92 percent recalled MailChimp as a sponsor, and 95 percent of listeners identified the brand correctly as an email marketing service.

But this type of brand recall is an anomaly. The same survey showed that 93 percent of Serial listeners give their full attention to the show, while only 57 percent of listeners give their full attention to their other favorite shows.

Podcasting is a medium that’s currently going through several changes in its technology, content diversity, and advertising. We can’t expect that what works for one brand or one show, especially if it’s a record-breaker like Serial, will set standards for everyone else.

The mass audience is coming… eventually

The number of podcast listeners has been growing steadily over the years, according to the latest Podcast Consumer study from Edison Research. A decade ago, only 11 percent of Americans reported ever listening to a podcast. Now, the number is three times that.

The same research shows that even though podcast consumption is growing, awareness of the word “podcasting” has been flat for years—which means that the term hasn’t quite caught on with the mainstream public. This can make it harder for podcasters, including brands, to introduce their shows to people who aren’t already regular podcast listeners. After all, only 17 percent of Americans—approximately 46 million people—listen to podcasts weekly.

“There’s a pretty big barrier to entry for the rest of the 250 million Americans to start listening,” said Anne Wootton, CEO of Pop Up Archive, which provides solutions for searching and organizing spoken word audio. “I think that the solutions that make it easier for people to actually pick up this new habit are really valuable and desperately needed.”

On the tech side, better solutions are needed for sharing and distributing podcasts. Per the Podcast Consumer study, podcast listeners are very active on social media, which means brands are missing a large opportunity.

“Every other medium has some form of representation on social media, and spoken word audio really doesn’t,” Wootton said, adding that there should be a more streamlined, accepted, and standardized way to engage audiences in social media.

The good news is that technical solutions aren’t the only way to bring podcasts into the mainstream. Look no further than President Obama’s appearance on WTF with Marc Maron, Hillary Clinton’s interview on Another Round, the creators of Welcome to Night Vale’s going on The Late Show with Stephen Colbert, and more. The publicity focused on podcasting seems ready to grow in 2016.

“We’re talking about changing behaviors and changing or augmenting how people consume audio in their daily lives,” Wootton said. “The potential for audio is particularly exciting.”