by Simon Owens
We’ve seen a new phrase enter our lexicon in recent months: the “Serial effect.” Google it and you’ll find this neologism employed everywhere from The Hollywood Reporter to USA Today, and it’s used to describe the cambrian explosion caused by Serial, a podcast that relitigates the trial of Adnan Syed, who was convicted of murdering his girlfriend in 1999. This podcast was so popular, the thinking goes, that it’s introduced millions of new listeners to the podcasting medium, in the process unleashing a tide that lifts all boats. Podcasts are now considered part of mainstream culture, a topic of watercooler conversation as well as a booming market for advertisers.
And there is evidence that the Serial effect is, indeed, real. Edison Research found that podcast listenership has increased by 18 percent in the last year. Each day we hear news of media companies launching new podcasts, the emergence of podcast networks, successes in podcast crowdfunding, and even the introduction of venture capital money. It’s hard to read that Marc Maron pulls in $15,000 for every podcast ad and not conclude that real money is being made on this platform that, up until a few months ago, was considered a hobbyist niche. In fact, it wouldn’t surprise me one bit if we see articles within the next year questioning whether we’ve entered a podcast bubble, one that’s produced an oversaturated market.
But though the Serial effect is genuine, new data reveal how any growth was relative and that we’re nowhere near reaching podcasting’s full potential, both in readership and revenue. According to a new fact sheet released by Pew, the percentage of Americans who have listened to a podcast within the last month sits at 17 percent, a mere two points above where it was in 2014. As Nick Quah wrote in his podcast newsletter Hot Pod, “the gains in podcasting over the past several months were significant in relative terms, but are really a drop in bucket in absolutes, particularly in the more significant metrics: listenership, brand awareness, so on and so forth.”
A new analysis from FiveThirtyEight shows that major advertisers are only beginning to dip their toes into the podcasting waters. A data journalist there listened to the top 100 most popular podcasts and recorded what types of ads populated these shows. Her most significant finding? Roughly a third of the top 100 podcasts didn’t contain a single ad. So while we keep hearing of podcasts fetching north of $20 CPM ad rates, relatively few podcasts have the kind of scale that attracts advertisers at all.
And the kind of companies who currently advertise on podcasts are still relatively small fry. Roughly 87 percent of ads were for web-based companies, most of which aren’t even publicly traded (anyone who listens to podcasts has likely heard ads for Squarespace, Stamps.com, and MailChimp, none of which are Fortune 100 material). Most of these are also of the direct response variety, meaning that a user is given a specific URL to go make purchases, thereby ensuring that the ad is measurable. This is a far cry from the much more lucrative brand advertising you’ll see from major consumer companies like Coke, McDonalds, and Samsung.
It can be argued, however, that Serial only just concluded in December, and it’s unrealistic to think that Madison Avenue would shift all its advertising budgets in a mere few months. And one data point in the FiveThirtyEight analysis pointed to why podcast advertising has nowhere to go but up: almost 100 percent of ads are read by the host or a producer for the show. As Andy Bowers, senior producer at Slate, told me recently, podcasting is the most “intimate medium,” with hosts speaking directly into your iPhone earbuds in what is almost perceived to be a one-on-one conversation. This is why their ads have been reported to be so effective, and it’s only a matter of time before larger brands latch on to this efficacy.
The question is whether this intimacy will transfer over into brand advertising. Most podcast advertisers are relatively small companies that haven’t accumulated any negative baggage. What happens when Walmart wants to sponsor a podcast — will the host be able to heartily endorse the company, and if he does, will it erode listener trust? And if we see the emergence of the polished, scripted ads typical on FM radio, will that taint what before felt like an un-commercialized medium?
Either way, with market penetration still relatively low and the continued growth in smartphone use, as well as the introduction of bluetooth technology in newer automobiles (which makes it easier to listen to podcasts while driving), I think it’s safe to say that we’ve only seen the tip of the iceberg when it comes to podcast adoption. With annual industry revenue at a paltry $34 million, it’s hard to blame podcasters for looking at the $44 billion annual radio industry and considering it an untapped goldmine, a revenue source that is nowhere near having reached its full potential.
Simon Owens is a tech and media journalist living in Washington, DC.