Is Selling Ads On Your Podcast Worth A Dime?

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Podcast advertising is how many podcasts achieve commercial viability. But that requires scale, and the amount of scale is always increasing. Here’s where the bar is set today and what that means to your podcast’s bottom line.

Podcasting is the weirdest industry. The same people who ask, “What is the absolute cheapest way I can get started podcasting?” are the very same ones who after a week ask, “How much money can I make selling ads on my show?”

No, that’s not unique to podcasting. But for anyone who’s made a commercially viable podcast, it’s worthy of a facepalm. 🤦

Last week at Podcast Movement Evolutions 2020, I paid a lot of attention to the conversations regarding podcast advertising as a business model. Mostly because of the new moves in podcast ad tech (something I’ll dig into in future episodes) that are increasingly interesting to my ex-ad-exec brain. But also to better understand where the threshold is today for having a show with an audience size big enough to be attractive to advertisers.

(Nota bene: I recognize there are many, many ways to monetize a podcast other than selling ads. I further recognize that super-niche shows don’t feel the same pressure to grow giant audiences the way more general or entertainment shows do. But we’re not talking about those today.)

Let’s start by being real about selling ads: Someone has to do it. It’s not like an army of ad sales reps are ready to pounce as soon as you hit some download threshold. Once you hit a number worthy of the ad sales reps consideration, you still have to reach out to them. Or switch to a hosting provider that works directly with ad sales reps so they see how large your show is. Regardless, there’s more to this than just hitting a number, OK?

So what’s big enough to be worthy of consideration? For many years, the threshold tossed around the community has been 5,000. No, not 5,000 total downloads over the life of your show. 5,000 downloads of a single episode of your show after it’s been live for 30 days. (If your podcast hosting company hides this number, well… I feel ya. Chartable will help you understand this better and likely works with your current podcast media hosting company. And it’s free!)

But according to the people I spoke with and saw on stage last week, that 5,000 download number is woefully out of date. The new threshold floated around was double that. Or quadruple that. Or in the case of one big direct response advertiser who talked about the success his company is having with podcast advertising, it’s 10x that. His team won’t even consider booking ads with shows that have less 50,000 downloads per episode after 30 days. Why so hight? Because it’s just not worth their time to set up the ad codes, the tracking, and all the complexities that go into setting up a new place to run ads unless the scale is there.

I spoke directly with a couple of ad sales companies who now set 20,000 as the number they’re looking for. Maybe they’ll back down to 10K if the show has an audience that directly fits the demographics of ads they are already running on other shows. Maybe.

But all of those numbers are a long way away from 5,000 (and certainly nowhere near the average number of 150) so that’s the reality.

It helps to look at the question of “how many downloads do I need?” through the lens of commercial viability. And all you need is to understand these five numbers:

  • Monthly downloads — Let’s say that you are consistently pulling 5,000 downloads per episode.
  • Sell-through rate — It’s really hard to sell 100% of your inventory, so let’s say you’re only able to regularly book ads for 50% of your available inventory. That’s a realistic number. Some of the podcasts that I talked to sell a lot more than that. Some sell less.
  • Ad spots per episode — For this exercise, let’s say you’re willing to do two ads per episode
  • Episode frequency — We’ll assume you do an episode every single week, so that’s four episodes per month.
  • CPM — $25 is a good placeholder CPM (cost per thousand). I’ve seen more. I’ve seen less. Let’s use this for an average.

Here’s how the math works:

  • 5,000 downloads * 50% sell-through = 2,500 “monetizable” impressions
  • 2,500 impressions * 2 ad slots = 5,000 sold ad spots per episode
  • 5,000 sold ad slots per weekly episode = 20,000 monthly sold ad slots
  • You get $25 for each one thousand impressions, or 25 * 20 = 500

That’s easy math, and it shows that 5,000 downloads can realistically become $500 per month. Put another way: that’s a dime per download.

I think you would agree that it’s very difficult to run a commercially viable business with a revenue stream of $500 per month.

If you double that and have 10,000 listeners, then you’d get $1,000 a month. Again, it’s very hard to run a commercially viable business with an income stream of $1,000 per month. A grand a month isn’t bad money for a side hustle. And it’ll certainly cover your costs as a hobbyist. But it’s a long way from commercial viability.

Which brings us back to the 50,000 number. With the helpful a-dime-a-download conversion, we’re at $5,000 per month. That’s a decent starting revenue stream, but any business would need more revenue streams than that before achieving commercial viability.

So here’s a radical thought. Assuming your show is not yet at that level (most aren’t), and further assuming that you aren’t financially ruined if you eschew the $50 or $100 a month of ad revenue you might get from some of the self-service podcast ad providers…

What if you focused on growing your show through word of mouth?

I recently spoke with a very successful podcaster who pressed home this point: don’t underestimate the power of spending an entire year where the only action item you give your listeners is to have them tell someone else about your show. No appeals to donate. No appeals to rate or review. Only a single call-to-action, repeated in every single episode for a year, that sincerely asks the listener to tell one friend about the show each and every time they listen.

If it works for you as it worked for the podcaster mentioned above, all those requests could pay off by having a show that does meet the threshold where commercial viability becomes more realistic.

So let’s try it. If you got this far, you’re either a working podcaster or you know working podcasters. Would you find one of them — just one — today and tell them about my show, Podcast Pontifications? Even if you’re just reading this article on my site, on Medium, or wherever you found it, send out an email, shoot someone a direct message, or just do whatever to tell a podcaster you know to check out Podcast Pontifications to hear a different take on the future of podcasting. They’d be into that, right?

And in the meantime, I shall be back tomorrow with yet another Podcast Pontifications.

Since you got this far (and going against what I just said), how about mashing that 👏 button a few dozen times to let me know you dig the written-word version of my thoughts on these podcasting topics? I’d sure appreciate it!

This article started life as a podcast episode. The 264th episode of my four-times-a-week short-form podcast called, oddly enough, Podcast Pontifications. It’s a podcast for working podcasters that’s focused on trends in our growing industry and ideas on ways to make podcasting not just easier, but better. Yes, you should listen. Here’s an easy way: 👇

Evo Terra (hey, that’s me!) has been podcasting since 2004, is the author of Podcasting For Dummies and Expert Podcasting Practices for Dummies, and is the CEO and founder of Simpler Media Productions, a strategic podcast consultancy working with businesses, brands, and professional service providers all around the world.

Podcast philosopher. Professional contrarian. On a mission to make podcasting better. Hip he/him. คุณ | http://PodcastPontifications.com | http://Simpler.Media

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