Investing in the Podcast Ecosystem in 2019

In the late 2000s, podcasts were a niche product. Since then, interest has grown rapidly. By early 2019, one-quarter of Americans tuned in weekly, and one-third listened at least monthly. Those who listen to podcasts spend more time listening each year, with weekly listeners now consuming around an hour of podcast content each day. The average listener is well-educated, about half earn more than $75,000 a year and about 44% are millennials. Investors deem the market ripe for investment, although observers warn that the industry may be overheating.

“Podcasts are most often consumed at home (48%) or in a car (26%); macro trends around growing numbers of connected cars and smart speakers could impact this mix.” ”

But podcasting still has potential for further development. Sean Rameswaram, host of the podcast Today, Explained, compares it to early video: “We’re still in the black-and-white period of podcasting. What’s color going to look like? What’s 3D going to look like?” How podcasts will evolve depends a lot on which features podcasting apps will support in the future. Meditation apps Calm and Headspace, for example, combine audio with other functions. Similarly, new niche audio apps might appear in areas like education, health or fitness. Other apps might add translation, transcriptions or visual enhancements. Podcasting app Entale, for example, incorporates AI to provide visual information related to the audio content, to link to web pages that provide more information or to place shopping links when a podcaster mentions a product.

“Roughly half of podcast listeners make $75,000 or more in annual income, a majority have a post-secondary degree, and almost one-third have a graduate degree.”

China’s equivalent of the US podcasting industry may hint at future developments. Most Western podcasting apps are fairly similar. In fact, most users don’t feel strongly about the app they use to load and listen to episodes. Chinese audio apps are more social, allowing users to make friends, interact during live audio broadcasts and tip producers. China’s Ximalaya has a pay-per-episode service – short content is around $0.03 – and offers audio courses that run from $10 to $45. Ximalaya also has a $3 subscription fee that allows a month of extensive access to more than 4,000 e-books and more than 300 premium podcasts and audio courses. Current US monetization models mostly rely on advertising or “off-platform donations.”

“The current state of monetization in podcasting mirrors the early internet: Revenue lags behind attention.”

Western podcasters monetize primarily via advertising. But even though advertisers believe in the value of podcast commercials, apps have yet to find smooth pathways to shuttle the user from the listening experience to the brand experience. Currently, the process for listeners who decide to buy an advertised product or engage with a brand they hear about is “manual and tedious.” User-paid premium content and subscriptions will likely become more relevant monetization models in the future.