What are Podcast Ads? The 2023 Definitive Guide

68 million people listen to podcasts weekly in the United States alone, and that number is expected to grow to 109 million in 2022. This audience is large and valuable: listeners are engaged, tuned in, and receptive to the hosts’ messages.

It’s no surprise, then, that brands are jumping into podcast advertising. In 2020, podcasting ad revenue was $842 million, a 19% increase from 2019. By 2023, IAB projects it to exceed $2 billion. If you’re a podcaster or podcast platform, it’s time to capitalize on this growing industry.

For individual podcast hosts, this article discusses how to monetize with podcast ads; for podcast hosting platforms, we highlight how you can offer your podcasters powerful ad serving functionality.

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What are podcast ads, and who uses them?

Podcast ads are audio ads promoted within a podcast. There are several kinds of podcast ads, including:

• Host-read ads: Voiced by the podcast host, these are pre-recorded or read live before, during, or after the podcast.
• Direct-sold audio ads: These are when the host works directly with an advertiser to insert a pre-recorded ad into the podcast, either manually or through dynamic insertion at time of download.
• Programmatic ads: Served through an ad network, these audio ads are inserted dynamically. There is no direct relationship with the podcaster.
• Sponsored/branded podcasts: This is when brands sponsor or create a podcast for self-promotion.

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Many podcasting platforms have built in advertising capabilities , such as:

1. Spotify - With nearly 44 million monthly listeners, Spotify is the number one podcast platform. Their platform allows podcasters to insert ads through “streaming ad insertion”, whether through a network or direct-sold. In Q2 they saw a 625% year over year ad revenue increase.
2. PRX - PRX built its own ad platform, Dovetail, where podcasters insert ads via dynamic ad insertion, enabling them to weave sponsorship messages into episodes. Podcasters can target by context, episode name and number, and more.
3. iHeartRadio - Boasting 150 million downloads per month, iHeartRadio has a strong podcasting platform. In 2020, they launched iHeartPodcast AdSuite, allowing hosts to insert ads into podcasts, thereby monetizing their 750+ original podcasts.

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Why monetize with podcast ads?

Ad monetization keeps the Internet open and free, and podcast ads make podcasts accessible. Podcasters with great content and listeners should be rewarded, which in turn creates free, quality podcasts for followers.

Meanwhile, podcasting platforms need a revenue stream, and ads are a key source for any content publisher. Building a robust ad product podcasters can harness moves in that direction.

Advertisers, moreover, love podcast ads and pay premiums for them. This is because 71% of podcast listeners take action after hearing sponsored content, and these ads are 6% more effective than traditional display ads. Due to this, podcasters see much higher CPMs than display ads (CPM usually means “revenue per thousand ad impressions”; for podcasts that would equate to revenue per thousand downloads).

Indeed, for a 30-second ad the industry average is $18 CPMs, and for 60 seconds, $25. This is per ad too; if you insert multiple ads per podcast, your revenue could be $100+ CPMs per episode. Here’s a tool to estimate your own CPMs.

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How individual podcasters can integrate podcast ads

There are many ways to insert podcast ads. Here are some of the pros and cons of each:

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1. Stitch them into your podcast manually:

Whether host-read or pre-recorded, these ads are hardcoded into the episode. One difficulty is finding direct relationships with advertisers; however, sponsorship marketplaces like Podcorn can help connect podcasters with advertisers.

When to consider this:

• You have a large (or niche) following, so finding direct advertisers won’t be hard.
• Your podcast platform doesn’t offer turnkey advertising functionality.
• Your advertisers want hardcoded or live-read ads, not dynamically inserted ads at time of download

When to think twice:

• You want automation. Manually reading these ads live throughout the podcast can be time consuming.
• You don’t have advertisers. Without direct advertisers, you’ll need to work with audio ad networks to monetize.

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2. Use your podcasting platform for direct-sold ads:

Rather than manually inserting or reading ads live, your platform could dynamically insert ads at time of download. These ads could be targeted by user, episode, etc.

When to consider this:

• You want full control and customization of your ads. Robust ad serving tools offer more flexibility and control of your ads, revenue, targeting, and more.
• Your hosting platform offers this.
• You have direct relationships with advertisers.

When to think twice:

• You don’t have demand. This works best with pre-existing direct relationships.

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3. Use your podcasting platform for programmatic ads:

Audio ad networks enable advertisers and publishers to buy and sell ads without direct relationships. This happens through dynamic ad insertion, in which ads are stitched at time of download, not hardcoded into the episode. These aren’t manually inserted into the podcast itself, and the networks provide targeting and find advertisers for you.

When to consider this:

• You need demand. Ad networks bring advertisers with them.
• You want to monetize quickly. Simply insert a VAST tag and get going
• Your podcasting platform enables this. If not, you’ll have to stick with manually-inserted ads.

When to think twice:

• You want to control your ads. These allow for little control over who is advertising, what the ads are, and targeting.
• You want higher CPMs. Like in display advertising, ad networks take a cut of ad revenue, depressing your eCPMs (your revenue for every 1,000 downloads). With direct-sold ads, you keep 100%.

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How podcast platforms can integrate podcast ads

If you’re a podcast platform, enabling easy ad monetization is a great way to draw and retain podcasters. Unfortunately, ad serving functionality is difficult to build yourself, and third-party ad servers won’t have the customization and server-side capabilities you need. The good news is, with the advent of ad APIs like Kevel, the choice is no longer “build vs buy”, it’s “build or build faster with APIs.” Below are the pros and cons of those options:

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1. Build yourself:

Podcast leaders like VoxNest and Spotify have built their own ad servers to great success. Unfortunately, it did take time and resources to launch what they wanted.

When to consider this:

• You have unlimited resources. Companies starting from scratch need engineers, resources, and time to complete this project.
• You want total customization. When creating something yourself, you decide the look and feel.
• You don’t want to pay a vendor fee.

When to think twice:

• You need to launch quickly. Building from scratch can take years, leading to lost revenue.
• You want engineering help. Building likely requires 10+ engineers, preferably with ad tech experience.

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2. Use ad APIs to build it faster:

Instead of building from scratch, you could use an ad API vendor, who would provide the software needed to easily build a bespoke podcasting ad platform.

When to consider this:

• You want to launch the platform quickly. Ad API solutions could enable you to launch your ideal ad product in just weeks.
• You want to focus on scale. If your system can’t handle the ad request volume, you’ll see slow response times, high server costs, and crashing systems, all of which lead to lost revenue. By outsourcing this work to an ads API partner, whose business is handling scale, you can focus on building new features, not putting out fires.
• You want cost efficiency. Buying an ad API solution saves hundreds of thousands of dollars on engineers, starting costs, and more.

When to think twice:

• You want total ownership. Even though an API platform acts as your backend infrastructure (like Twilio, AWS, Stripe, etc), you are still entrusting your product’s performance to a third-party.

With podcast ad APIs being a nascent industry, there are few players in the space. The largest solution is Kevel, who powers the ad platforms for brands like Edisound.

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Why podcast advertising isn’t like traditional display advertising

Podcast advertising is more limited than traditional display advertising. If you’re a podcasting platform looking to build your own ad server, it’s important to understand the features you can offer advertisers and podcasters, such as:

1. Geo-Targeting - This uses the IP address to target ads based on one’s location.
2. Podcast Name/Episode Number - Advertisers can target specific podcasts, even the episode number.
3. Podcast Category - With this, you can target podcast genres. Nike, for example, could choose to target all podcasts tagged as “Sports-related”.
4. Episode Content - You can transcribe and store every episode’s dialogue, then have advertisers target specific key terms. If the terms appear in the transcript, then the advertiser’s ads are eligible for that episode.
5. Day/Hour Targeting - This enables targeting by time of day and/or day of week. While this pertains to time of podcast download (versus listen itself), you could nonetheless offer, say, McDonalds the opportunity to promote their coffee to anyone downloading a podcast on weekday morning (presumably for their work commute).
6. Third-Party Data Targeting - This would primarily be around IP Address and includes ideas like:

- Weather Targeting: Using a Weather API like OpenWeatherMap, you could request the weather around that user (like “rain”), then allow advertisers to target people in specific weather conditions.

- Company Targeting: Using a company API like Clearbit, you could identify where the user works (like “Microsoft), then allow advertisers to target specific industries, companies, etc.

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Meanwhile, if you are used to display advertising, podcast ad monetization has limitations, including:

1. No first-party or third-party cookies. These store information about the user beyond just IP Addresses — such as past behavior, demographic information, and more. Advertisers pay premiums for this granular targeting, but podcast targeting doesn’t have the same capabilities.
2. Ads are inserted at download, not time of listen. Ad requests happen when users download the podcast (including automatic downloads). Without guaranteeing the person will open the podcast (or when), this makes time-sensitive ads tricky.
3. Ad measurement is difficult. With display ads, identifying ad visibility is easy. With podcast ads, it’s more difficult. While podcasting platforms could track how far into an episode a user got and then proxy actual # of listens of an ad, the easiest path is to measure # of ads inserted, regardless of engagement.

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Other features you’ll want to build

Besides just targeting, a full-featured podcast ad platform will offer the below functionality:

1. Daily Caps: This automates ad pacing based on agreed-upon targets. For instance, if you charge Casper Mattress $20 for every 1,000 placed ads - but they want to spend only $50 a day — then the system would pace their ad evenly through the day so it only served 2,500 ads in total.
2. Lifetime Caps / Start & Stop Dates: You can automate the starting/stopping of campaigns based on agreed-upon metrics. If an advertiser, for example, wants to end the campaign on the 31st — or when they hit $500 in spend — the system would automatically pause it (you could also set campaigns to launch in the future)
3. Priorities/Sponsorships: You can have logic that assigns “waterfall” rules to what ads get selected. Dedicated sponsorships may get the first look, direct-sold advertisers may get the second, and then finally it would go to programmatic demand if there are none of the above.
4. Lottery Ad Rotation: If there are multiple ad candidates, you could select them randomly - allowing advertisers to rotate evenly.
5. Auction Pricing: Alternatively, auction pricing will select the ad that’ll drive the most revenue for you. For instance, if Casper is willing to pay $1, but Purple will pay $1.50, thenPurple would win the auction
6. Sequential Ads: You could also enable “story” experiences, where an advertiser has, say, three audio ads that need to appear in a certain order throughout the podcast. In this case, the first ad could be placed in the first commercial break; the second in the next one; and so on.
7. Self-Serve UI: You could build a self-serve UI for advertisers to manage their own campaigns.

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How to get started with podcast ad monetization quickly

If you are an individual podcaster, your best bet is to partner with a hosting platform that provides turnkey access to ad insertion tools. For demand, you could either connect with an audio ad network or try to find advertisers yourself.

If you are a podcasting platform,you are likely thinking about building an ad server in house (or trying to scale your homegrown one). Beware - building this from scratch can be expensive and time-confusing. We recommend using Kevel’s podcasting ad APIs to build the exact podcast ad server you want in just weeks.Reach out for more information.