Podcast ad revenue in the US cracked $1 billion for the first time last year, due in large part to the rise of dynamic ad insertion (DAI).
At $1.4 billion – up 72% from roughly $840 million in 2020 – podcasting is now one of the fastest-growing digital media channels, and it’s growing twice as fast as the internet advertising market as a whole, according to a report on podcast ad revenue released by the IAB and PricewaterhouseCoopers on Monday.
The IAB predicts podcast ad revenue will top $2 billion this year and hit more than $4 billion by 2024.
What’s driving this growth?
People are listening to more podcasts, which logically leads to an uptick in ad demand across categories. But there’s also been an increase in the use of automated ad delivery, particularly DAI.
DAI allows advertisers to serve ads at the moment a podcast episode is downloaded, rather than producing the entire podcast – ads and all – as a single audio file that can’t be changed.
The use of DAI compared with baked-in ads has increased dramatically since 2019, when the split was nearly even at 48% DAI vs. 52% traditional ads. By 2021, DAI accounted for 84% of podcast ads.
“DAI simplifies logistics because it’s seamless and automated, and in a high-demand space, that’s key,” said Chris Bruderle, the IAB’s VP of research and insights. “Over the last two years, advertisers needed to be more nimble with their messaging, and DAI enables that to a much greater extent than embedded host-read ads.”
With DAI, ads can be tailored to the listener at the moment they’re listening to the podcast using a variety of data signals, such as geolocation or weather data.
For example, if a fashion brand buys an ad placement, the listener can be served an ad for swimsuits if they’re listening to the podcast in an area with warm weather, or an ad for gloves and scarves if they’re listening in an area where the weather is cold.
DAI also allows publishers to remonetize back-catalogue podcast episodes, which is important because new listeners tend to go back and binge a podcast’s older content, Bruderle said.
Although the growth of DAI is mainly being driven by advertiser demand, publishers are also getting more sophisticated with the technology they offer, Bruderle said.
“Some major publishers in the space are now requiring podcasts to be created with dynamic ad insertion capabilities enabled on the server side,” he said. “The biggest players … [are] acquiring smaller [podcasting] companies, so now a higher percentage of podcast creators have access to this tech.”
Deals like iHeartMedia’s acquisitions of Triton Digital, Voxnest, Radiojar and Jelli – and Spotify’s acquisition of Megaphone – make automated monetization tools like DAI available to a wider pool of publishers.
Bull’s-eye on targeting solutions
With the rise of DAI comes an associated demand for more refined targeting tools.
The majority of advertisers (93%) target by genre, while 86% use geotargeting and 79% use contextual signals, such as the title of a specific episode.
Demographic signals, such as age and gender (53%), and audience data overlays (38%) will likely increase in popularity over the coming years. Twenty-three percent of publishers say their clients are not currently using these two types of signals but they are planning to do so.
(“Audience data overlays” refers to any tech that enables advertisers to overlay their own customer data with third-party data and/or publisher first-party data.)
Programmatic’s small slice of the pie
Although automated approaches to ad insertion like DAI are on the rise, programmatic, including RTB and private marketplace deals, still represents a tiny fraction of the podcast ad market, accounting for only 1.7% of revenue in 2021.
From a tech standpoint, “podcasting is not set up to deliver to DSPs the data needed to power programmatic,” Bruderle said. “In order for podcasting to become more of a programmatic space, it would need to evolve from a primarily download-based medium into a truly streamed form of media.”
But brand safety is also a barrier.
Adoption of brand safety and suitability solutions for podcast advertising remains low compared to other digital channels. Only 44% of publishers reported using brand safety solutions, and just 33% currently use brand suitability solutions.
Just 6% publishers say they plan to implement brand safety solutions in the near term. That number rises slightly to 11% for brand suitability tools.
“The tech for reading the text of a podcast is not where it needs to be right now,” Bruderle said. “The IAB is working on a way to standardize the integration of text so it can be read and parsed for brand suitability and brand safety.”