The Next Big Ad Medium: Podcasts

Advertisers will spend more than $400 million on podcasting by 2011, but they're still not sure who will be listening to them

by Catherine Holahan

Remember podcasting? While marketers have been busy uploading commercials to YouTube, the once-buzzed-about medium has spent the past two years building its audience and enhancing advertising capability. Now, podcasts are finally poised to grab a larger slice of the multibillion-dollar online advertising pie.

Research firm eMarketer expects that advertisers will spend more than $400 million on podcasting by 2011, up from $80 million last year, according to a report scheduled for release later this week. Fueling the anticipated growth is the expected entrance of Google (GOOG) into the podcasting arena, as well as new podcasting services focused on answering advertisers' most pressing questions: How many people are tuning in to the hundreds of thousands of online podcasts, and who are they?

Report author James Belcher expects that the Mountain View (Calif.) company will develop the ability to insert audio ads, based on keywords, into audio podcasts within the next five years. The online advertising goliath has been quiet about any plans to do so. However, Google extended its reach into audio marketing with the acquisition of radio advertising company dMarc last year (see BusinessWeek.com, 7/17/06, "Today Search, Tomorrow Ads?"). "One of the things coming down the pike is Google will develop some version of AdSense for podcasts," says Belcher.

Reaching Listeners

The medium isn't waiting for Google, however. On Feb. 14, podcast company Podtrac unveiled a free online service that enables advertisers to research audience information for audio and video podcasts based on demographics, size, and other characteristics. The company, which helps connect roughly 5,000 of the top podcasters to advertisers, includes data for all podcasts in its new service, including those from major media companies with whom Podtrac is not affiliated. It indexes its data to information in Mediamark Research's Survey of the American Consumer.

The hope, explains Podtrac chief executive and co-founder Mark McCrery, is that the service will give advertisers enough data to become comfortable with the new medium. "We want to grow the market for podcast advertising," says McCrery, adding that advertisers want the same information they get from traditional media when buying ads online.

Belcher credits such technology with helping solve one of the major problems podcasters have faced with advertisers: an inability to prove they have the size or type of audience they claim. It's a problem that Jonathan Cobb knows well. As the CEO and founder of Kiptronic, a startup that places ads within audio and video podcasts, Cobb says marketers have been skittish about advertising on a digital medium that, though it reports downloads, can't always charge based on the number of people who interact with the ad. "There is no way for somebody who is jogging and listening to a podcast at the gym to click on an ad," Cobb notes.

He points out that television and radio do not provide click-through rates either. But advertisers have grown to trust—or at least accept—data from third-party auditors. Cobb believes they are just beginning to trust podcast companies' internal data, taken from surveys. Kiptronic, for example, can tell advertisers generally where computers that downloaded audio or video files are located.

Finding That Niche

The entry of major media companies into podcasting has encouraged advertisers to embrace the medium, says Bob Fogarty, vice-president of sales and business development at PodZinger, an audio- and video-search engine that also sells advertising on podcasts. "When you see major players like Clear Channel (CCU) and CBS Radio (CBS) and personality types like Rush Limbaugh have adopted podcasting, you realize it has sort of crossed over into the mainstream," says Fogarty.

The increase of video podcasts, which lend themselves to the kind of video ads that marketers are accustomed to developing for television, has also increased advertiser interest. Also expected to entice advertisers is the highly targeted audience of many podcasts, says Belcher. For example, there are podcasts for people interested in consumer electronics, skateboarding, and comic books. "You can really serve a niche much better than traditional television," says David Prager, chief operating officer and VP of programming at Revision3, an online television network that shows video podcasts. Its most popular, Diggnation, is viewed 250,000 times per week, Prager says.

The more targeted the audience, the more likely advertisers can reach a consumer willing to buy their product. And in theory, that increased targeting will at some point lead to higher-priced advertising.