Major advertisers are purchasing fewer and fewer broadcast radio ads, but that doesn’t mean audio programming is fading from the culture. Podcasts — radio’s younger, on-demand sibling — are swiftly gaining popularity with many of the demographics that marketers desire most.

Why are podcasts so popular? For one, many people listen to them on smartphones, so episodes can tag along on morning commutes, midday walks and evening jogs. Plus, there are more than 550,000 shows with topics for nearly every interest. That wealth of content has turned 73 million Americans into podcast listeners, according to recent data, and that audience is projected to grow 81% by 2022.

With an audience so large, the surge in podcast advertising comes as no surprise. In 2018, advertising on podcasts generated $402 million in revenue, and spending could hit $659 million in 2020. Such rapid growth raises an obvious question: Do podcast sponsorships deliver a solid return on investment? The answer is yes, if your business knows how to leverage the channel. But before diving into how to create an effective campaign, it’s important to explore why podcasts offer so much potential.

Why Podcast Advertising is Effective

In 2017, global spending on digital advertising outdid TV spots for the first time. However, increased spending doesn't automatically make it an effective medium. A reason to doubt digital advertising is that millennials, a key marketing demographic, are so selective about information that ignoring visual ads is second-nature. Additionally, ad-blocking software ensures display ads never appear for about 30.1% of internet users.

Ad-avoidance may plague many marketing channels, but not podcasts. In fact, 78% of listeners actually approve of podcast sponsorships. Why? Because the listeners make the connection that the advertising funds the content that they truly value.

Podcast listeners don’t simply approve of ads; many find them memorable and motivating. That’s according to Podcast Playbook, published by Interactive Advertising Bureau. Data in that report indicated 67% of listeners could recall products and brands featured in ads. Even better, 61% actually paid for a product or service they learned about on podcasts.

How Does Podcast Advertising Work?

The average podcast has three slots for ads — a pre-roll, mid-roll and post-roll. A pre-roll ad greets listeners during the first 15 to 30 seconds of an episode. Mid-roll ads last 60 to 90 seconds and play halfway through an episode. A 20- to 30-second post-roll ad plays just before the closing credits.

Podcast hosts read the majority of ads, either during the flow of a show or a pre-recorded segment. Many advertisers prefer the former, as "live reads" allow hosts to improvise unique advertising messages or relate products to the theme of a show. This enables ads to seem like another segment instead of a paid endorsement.

After a host reads an ad, companies must determine if it generated a positive return on investment. Unlike pay-per-click ads that capture consumer behavior in real time, podcasts don’t offer a built-in way to indicate that listeners took a desired action. However, there are reliable ways to measure the ROI that advertising on podcasts delivers, according to Forbes:

• Promo codes: A specific word or phrase that is entered into a website’s checkout screen to track if a podcast generated a sale
• Vanity URLs: A specific website link or extension that allows advertisers to count how many visitors a podcast produced
• Checkout surveys: A question posed during a payment process to determine when podcasts sponsorships create sales

The above tools are best suited for direct response campaigns, the most common type of podcast advertising. For brand awareness campaigns, marketers can monitor social media to see if podcast sponsorships deliver a boost in likes, shares and mentions.

5 Tips for Effective Campaigns

Advertising on podcasts may be a great way to acquire customers, but that doesn’t mean it’s easy to create an effective campaign. To get the most out of your marketing budget, consider these tips:

1. Midway is the best way
   Schedule your ad to play during the mid-roll slot when possible. At that time, people are listening closely. This could reduce the risk of listeners fast forwarding past your ad.
2. Find your fit
   Because podcasts serve an immense spectrum of interests and audiences, you should identify shows that perfectly sync with your brand, products and services.
3. Test ad performance over time
   Running a single ad on a podcast likely won’t reveal if the show is an effective advertising option. For a more accurate view of performance, consider advertising on eight consecutive episodes to reinforce your call to action over time. Then, review the performance after your campaign concludes.
4. Use offer codes and metrics tools
   As we reviewed earlier, use promo codes and other tools to learn if listeners acted on your podcast advertising. For brand campaigns, monitor social channels for a bump in mentions, likes and shares.
5. Trust — and tap into — a host’s appeal
   Letting a host deliver your ad allows listeners to hear your offer from a personality they like and trust. As a result, warm feelings evoked by a host may carry forward to your brand.

For similar reasons to why you should let the host read the ad, you shouldn’t feel compelled to write airtight scripts. Providing a series of actionable points may work better, as this approach allows a host to personalize the ad for his or her audience. Be sure the host has in-depth knowledge about your product or brand to provide a genuine, entertaining message that is difficult to skip.

Success Stories & What’s Next

Many businesses weren't well known when they began advertising on podcasts. SquareSpace, Zip Recruiter and Rocket Mortgages are early adopters of podcast sponsorships, and they leveraged the medium to become established brands. One of the greatest success stories took place in 2014, when email platform MailChimp sponsored the first season of "Serial," a long-form nonfiction podcast. That investment paid off when 31 million episodes were downloaded and MailChimp’s unique ad went viral.

Success enjoyed by startups has convinced Fortune 500 companies to sponsor podcasts, such as Delta, Discover and Wells Fargo. Big companies are using their substantial budgets to innovate what podcast sponsorships can be. In 2016, eBay partnered with Gimlet Media to create "Open for Business," a branded podcast that explores the ins and outs of founding a company. So far, the sponsorship has paid off, as downloads have surpassed eBay’s projected goal by more than 200%.

Branded shows are just one development that could change the podcast advertising landscape. The next big change could be widespread adoption of dynamic advertising. This means a single ad wouldn’t play for every person who downloads an episode. Instead, geotargeting, demographics and the time that someone downloads an episode would determine the ad that a listener hears. This flexibility allows companies to narrow the targeting of their podcast advertising spend, making the channel even more valuable.

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