Measuring ROI for podcast advertising campaigns

How can you maximise the effectiveness of your campaigns and avoid burning ad dollars?

How do you know if your advertising is working? This question has haunted the industry since Philadelphia retailer John Wanamaker is said to have remarked, more than a century ago: “Half of the money I spend on advertising is wasted; the trouble is I don’t know which half.” In a herculean effort to address Wanamaker’s concern, agencies and media owners have amassed anecdotal evidence, organised an infinite variety of focus groups and mined gazillions of bits of data, yet the issue still resurfaces whenever a new media channel emerges, such as podcasts.

Wanamaker’s question – simply put, why advertise?– is particularly pertinent with so many brands investing in podcast advertising and sponsorship; The IAB predicts that podcasts will generate $4 billion in US ad revenue by 2025, up from $1.8 billion in 2022. Discussions of effectiveness all but invite marketers to dive headfirst into a sea of data but, before they do, they would do well to understand exactly what they want their campaign to achieve. As staggeringly obvious as that sounds sometimes, in the rush to create, goals are often assumed rather than defined, making it more likely that some internal stakeholders will be dissatisfied with results. 

A clear objective makes it easier to select the right tools for the job. A conventional radio ad may deliver an immediate rush of orders but building brand awareness on a podcast will usually require something more bespoke, relaxed and longer term. 

One sure way for brands to burn advertising dollars is to take the metrics, formats and content developed for radio advertising and throw them at podcasts. The two audio media are fundamentally different – as Kelsey Woo, senior product marketing manager at Spotify, says: “Radio advertising is a one-to-many outlet, but podcast advertising can build a one-on-one connection with a tailored message that is relevant to the listener and the moment.” 

The listening experience is completely different too. You can ‘hear’ commercial radio on autopilot. With a podcast, listeners create their own visuals to accompany the words, an effect some psychologists call a ‘theatre of the mind’. To put it another way, podcasts reach parts of the brain other media simply cannot reach.

The right place at the right time

A cardinal virtue of podcast advertising, particularly for brands wooing Gen Z consumers, is that it doesn’t feel like advertising. “This demographic is strikingly averse to traditional advertising formats,” says Sally Miller, chief marketing officer of Auddy. This is partly, she adds, because of the way they consume media – “Gen Z’s use of linear TV has virtually flatlined, 29% of them don’t watch it at all” – and partly due to their innate scepticism.“They are much more likely to accept a message from a host, someone they have chosen to listen to,” she says. “A lot of people don’t want advertising thrown in their face, they prefer a much more laid-back approach.” Roughly six out of 10 skip every advert and use ad blockers. No wonder media consultancy Nielsen calls them “the elusive generation”.

Bianca Bush, commercial insights manager for Acast in the UK and Ireland, says Gen Z’s attitudes give podcasts a compelling advantage. “One of the qualities that distinguishes podcasting is its intimacy,” Bush says. “Research shows that many listeners feel as if the host is a friend, and that relationship gives commercial messages more resonance and relevance.” In the words of British brand guru Bob Sheard, “Some people like their insights a mile wide and an inch deep. Others want them an inch wide and a mile deep.” For the latter group, podcasts are the logical channel of choice.

As Woo at Spotify puts it: “We have learned there is no such thing as a passive podcast listener. Reaching highly-engaged listeners in a one-to-one medium is a core value proposition for podcast advertising. Brands can reach an incredibly diverse audience on this platform although we also know that globally, one in three users of Spotify Free are from Gen Z.”

There is much evidence to support talk of relevance and resonance – and, indeed, that relevance enhances resonance. A recent study by Edison Research found that 74% of Super Listeners (defined as devoting more than 11 hours a week to podcasts) visited a company’s website after hearing advertisers or sponsors on their favourite podcasts, 65% purchased something and 49% believed that hosts used the products they are talking about or selling. 

The ‘one-to-many’ model – and its step-sibling, ‘share of voice’ advertising – will always be with us but, Bush says, “because podcasts are authentic, personable, trusted and niche, they provide an environment which makes adverts impactful.” The right content in the right context can drive awareness, change perceptions and inspire action. For example, one branded podcast created by Acast for Ulta Beauty boosted brand awareness by 95%, the company said. Across the industry as a whole, Nielsen’s research suggests that podcast campaigns drive a 14-point increase in brand awareness and seven-point rise in information seeking.

And, given the nature of the beast, Bush adds, advertisers can take more creative risks on podcasts. Adam Buxton’s ads on his podcast are funny, relatable and memorable – qualities that represent the holy grail for many creative agencies working on TV and radio advertisements.

There is a Jerry Maguire “You had me at hello” thing going on here, too. A listener who is passionate about cows, parallel timelines or writing pens – all podcasts which actually exist – is likely to warm to a brand engaging with their favourite show. Brands should not, though, assume that all listeners are niche hobbyists. According to Miller, in the US the top 500 podcasts have 75% of the listeners, while a show like The Joe Rogan Experience, hosted by the eponymous comedian and UFC commentator, has almost 15 million subscribers on YouTube alone.

Cynics question whether people actually listen to the stuff they download but research by PodNews suggests that roughly seven out of 10 people play almost all episodes. And they pay attention too– more than nine out of 10 episodes are listened to alone. “Advertisers and sponsors do not have to worry about clutter, because there is much less competition than on radio where you might hear eight ads in a commercial break,” says Bush. As for commercial TV, on a typical day, a Briton will spend 43 minutes watching 36 different ads. Bush’s point is reinforced by a 2022 Guardian study which found that 65% of the podcast audience paid attention to ads, compared to 39% for TV and 38% for radio.

Building for success

Ultimately, how a brand measures ROI on its podcast advertising or sponsorship depends on three things: the objective, the nature of the campaign and the budget. “As in any nascent industry, customers are buying into three levels of contract,” says Miller. “An entry-level pay-as-you-go model, a mid-range monthly arrangement and a bespoke enterprise offering which includes content creation, support and format development.”

If brands want to pull out all the stops they can turn to econometrics, which draws on economic theory, mathematics and statistical inference to quantify a campaign’s impact. That sounds perfect but, as Miller points out, you need a hefty budget (£20,000 and upwards) and three years’ data across all channels to reach a definitive verdict. 

At the other end of the scale, Bush says, an advertiser can insert a link or code to quantify response. This digital version of cut-out coupons in newspapers and magazines will suffice for many brands, especially SMEs attracted by the channel’s comparatively low entry costs.

Somewhere between these extremes, brands can choose from a range of tools to measure conversion rates. Last year, across the industry, Spotify estimated that the conversion rate was 1.2% (the number of attributed households that visit a brand site) with pre-roll ads performing 8% better than mid-roll ads. 

Podcasting is still a relatively young medium but Miller says the big platforms can provide much of the data advertisers would expect from traditional media, such as ad impressions, audience insights, measurable attributions, devices used and audience reach. What podcasters need to get better at, she admits, is drilling down deeper to prove the impact of individual campaigns. Both Auddy and Acast say more brands now measure ROI through A/B testing, comparing the uplift from identical campaigns on podcasts and a rival channel.

As competition grows fiercer, with YouTube spending lavishly – and TikTok hovering in the wings – the major networks are developing more sophisticated tools and investing, both internally and through acquisition (as Spotify did last year, snapping up conversion analytics specialist Podsights).

A wider range of options, coupled with podcasting’s burgeoning global popularity – last year, Spotify’s Woo says, there was explosive growth in southern Europe with downloads up 379% in France, 298% in Spain and 244% in Italy – are attracting advertisers from different sectors, especially entertainment, healthcare, B2B and travel. 

Private Eye magazine (which has its own podcast, Page 94) satirises the alacrity with which the chattering classes embrace every latest trend in its Neophiliacs column. It would be equally valid to run a column called Neophobics in which everything new is doubted, derided and dismissed. The neophobics, especially in traditional media, hail every bump in the road for podcasting (such as Spotify’s recent travails) as proof that it is a pandemic-induced fad. This isn’t forecasting, it’s wishcasting. 

The days when podcasts were predominantly made by geeks for other geeks are long gone. They have even been credited - by the New Yorker,no less – with reviving the waning art of storytelling. If podcast creators, platforms and networks can up their game on proving effectiveness to sponsors and advertisers, they will make these Jeremiahs look as prescient as American radio pioneer Lee De Forest, who proclaimed in 1926: “While theoretically and technically, television may be feasible, I consider it an impossibility financially and commercially, a development of which we need waste little time dreaming.”