Podcasts are not a niche market. One-third of Americans listen to podcasts monthly with one-quarter of these listeners tuning in on a weekly basis, according to a new report Investing in the Podcast Ecosystem in 2019 from Andreessen Horowitz. In fact, listeners now spend over six hours each week on podcasts, consuming approximately seven episodes per week.

While the term podcasting was first coined in 2004, it wasn’t until the creation of the iPhone podcast app in 2012 that podcast listening captured mainstream appeal. To date, Apple has 27M monthly active podcast users in the U.S. and accounts for the majority of podcast listening.

The five segments of podcast producers are:

1. Media Companies

Larger media companies with a variety of content formats (broadcast radio, newspaper, magazine, etc.), which monetize podcasts primarily through ads. Other monetization channels include circulation revenue (e.g. iHeartMedia, The New York Times, NPR, Slate, The Washington Post).

2. Podcast-Only Production Companies

Podcast production studios create their own content and distribute on other listening platforms like Apple Podcasts or Spotify. They monetize podcasts through ad revenue, licensing to TV/film and exclusives with listening platforms (e.g. Wondery, Gimlet, Cadence13, WaitWhat).

3. Large Indies

These are primarily personality-driven talk shows with celebrity/influencer hosts. Often these podcasts are monetized mostly through donations, ads, and merchandise (e.g. Joe Rogan, Sam Harris and Tim Ferriss).

4. Non-Media Businesses & Non-Profits

Most often these have a stated goal behind their podcasting initiative. These are largely brand-building marketing efforts, rather than focused on driving revenue and are often reliant on working with a 3rd party.

5. Hobbyist Creator

Any individual creating and posting content. Often unmonetized.

Monetization

Podcasts are primarily monetized via ads, sponsorships, listener donations, membership, and subscription models. However, ad revenue is quite small (0.3B), as compared to other media revenues. I

Currently, podcast advertisers pay per guarantee per download. While this can work for direct response advertisers, it is not effective for brand advertisers that want to form an impression on consumers over a period of time. The accounting in this report shows that 56% of podcasts use dynamic ad insertion.

Still, podcasts are an attractive environment for a hard-to-reach audience. Some podcasters charge listeners for early access to content, ad-free listening, or exclusive bonus episodes. Apple Podcasts does not yet enable this, which has led to some creators to turn to iTunes or third-party sites to sell their content. Podcasting is still in the very early stages of developing monetization strategies for long term growth.

A new model of monetization comes from a company called Patreon, a membership-based platform that provides the tools needed for creators to run a subscription content service. The system allows podcasters to receive funding directly from their fans, aka patrons, on a recurring basis. Patreon charges a commission of 5% for each donation and 5% in transaction fees, leaving the podcasters with 90% of the donations. While a positive model for podcasters, profitability at this time appears limited.

Apps and the larger marketplace

Interestingly, the report suggests that users do not feel passionately about their podcast app. At the end of the day, the audio content is the core element users are engaging with, not the application. The app is a utility and, while Apple maintains the largest share of listeners, its market share dropped significantly last year from over 80% to 63% with the launch of Google Podcasts.

However, apps are being developed that offer new approaches to enhance the podcast market. For example, Castbox offers translation and transcription. This means that consumers can search within podcasts via the transcribed text. Other apps are add context with visual links to the podcast. Entale is a “visual podcast app” that uses AI to showcase relevant visual links for uses to view as the podcast is playing. Further, podcast publishers with larger follower base are creating their own platforms for distributing content. Slate Plus and The Athletic are great examples of using an established fan base to build a strong brand extension. Clearly, there’s an opportunity to build a network of creators and listeners.

New interactive podcasts talk shows and call-in shows, with social elements, are part of podcasting’s future. However, for the podcast market to flourish, podcasting needs to concentrate on finding new and easier ways for creators to distribute their own content, own their customers, and to monetize through alternative sources besides advertising and off-platform donations.