Podcasting is an incredibly accessible media channel for publishers, creators and advertisers; it's one of the medium's biggest advantages. However, while the barriers to entry are low, the monetisation side of the industry can be somewhat opaque and confusing.
In particular, the use of CPM as a standard basis for structuring ad campaigns can leave podcasters scratching their heads if they're not familiar with it. Equally, if you're a small business owner looking to use some of the podcast industry's self-service advertising tools to explore the medium's advertising potential, it can seem intimidatingly complex.
CPMs for advertisers
CPM stands for Cost Per Mille (from the Latin word for ‘thousand’), and is used in advertising to refer to a buying structure where advertisers are charged a set rate for every thousand impressions their ad receives. The more people see or hear their ad, the more they’ll have to pay.
As well as agreeing to specific CPM rates, advertisers will generally also set maximum campaign budgets to ensure a sudden spike in impressions doesn’t end up accidentally eating through their entire allocated funding.
CPM-based advertising is most commonly used in high-volume channels with good level of measurability, where the specific number of impressions can be easily tracked. It’s historically been most popular for display advertising on websites, and is often used alongside programmatic buying models.
In podcasting, CPM is the most common structure for buying host-read and spot ads (both directly and programmatically), partly because it’s a system that’s already familiar to advertisers, and partly because it’s easy to scale campaigns up or down as needed. Advertisers often like CPM-based campaigns due to their predictable costs, and the fact that they can purchase them with the confidence that their ads will receive the intended number of impressions; many ad contracts will include clauses to ensure that refunds or additional ad inventory is provided if this is not the case.
CPMs for publishers
For podcasters, networks or media owners that are monetising their podcasts via host-read or spot ads, the revenue they make from these ads will also be measured based on CPM. However, it’s important to note that the CPM that an advertiser initially pays for their ad campaign isn’t going to be the same as the CPM that a publisher earns for having those ads on their shows.
This is because various stakeholders take their share of that revenue in the form of processing fees and the like before it reaches the publisher. The fees involved can vary based on how many companies are part of the supply chain for a given campaign, and different ad sales organisations will also take different percentages.
As a good rule of thumb, publishers can expect the CPM fees they receive to be around 50% of what the advertiser paid in the first place, although this can be lower or higher depending on various factors. This is a significant factor in why so many media owners prefer to form direct relationships with brand marketers where possible, allowing them to circumvent as many middlemen agencies as they can to grow their final share.
CPM vs CPA and CPC
While CPM-based advertising structures tend to be the most common in digital advertising (including podcasting), other models have risen in prominence over the years. In digital display advertising, for example, CPA (cost per acquisition) and CPC (cost per click) both have staunch advocates.
Both are designed to combat what some argue are inherent problems with CPM models; the fact that an ‘impression’ doesn’t guarantee that someone actually saw an ad and took it in. In display advertising, this might be due to the fact that they simply scrolled past it on a web page, while in podcasting, it might be due to users downloading an episode without actually listening to it.
CPC models are based on paying out a certain amount for every time a user clicks through from an ad to the advertiser’s website or app, on the basis that this is a more reliable signal of interest than simply seeing or hearing an ad. CPA models, meanwhile, take this a step further by paying out every time someone takes a specific desired action after consuming an ad. This might be signing up for a newsletter or free trial, or making a purchase.
These models are occasionally found in podcasting; show-specific offer codes, for example, are rudimentary ways to track the impact of a podcast ad which can be used to inform CPA-based payment models, and pixel-based adtech tracking is increasingly being used to measure listener activity after hearing an ad. However, both CPC and CPA are more difficult to effectively track than with display advertising, and as such have not gained as much traction within podcasting.
What influences CPMs
The CPM rate that advertisers pay (and consequently the CPM that publishers will receive) varies based on a number of factors. It’s chiefly determined by the size of the audience, with larger monthly download numbers commanding a larger CPM. Other considerations may be taken into account, however, such as if a podcast’s audience represents a particularly desirable demographic like high earners or business leaders in a specific sector.
The placement of an ad will impact this too, with mid-roll ads generally being the most expensive slots and post-roll ads being the cheapest (due to listener’s tendency to switch off before they hit them). Similarly, host-read ads will be more expensive in terms of CPM compared to pre-packaged ads provided by the advertiser.
As with many digital ad channels, increased targeting of ad campaigns (particularly when bought programmatically) will lead to higher costs. Many podcast ad networks will let advertisers target specific countries at no extra cost, but more granular targeting on the basis of demographics like income bracket, age or gender are likely to increase the price. CPMs can also change based on trends within the podcast market and the wider advertising industry, and will vary from one sales provider to another.
Average podcast advertising CPMs
Due to the factors highlighted above, it can be tricky to establish a definitive figure for how much a given campaign is likely to cost in terms of CPM without speaking to a platform about specific requirements. However, we can use figures provided by some of the major ad networks to establish a rough benchmark.
Acast quotes average CPMs of between $15 and $30 for pre-recorded ads up to 60 seconds, with host-reads at $25-$40. Libsyn, meanwhile, currently puts the average CPM of a 30-second ad at $18 and a 60-second ad at $25 (although this varies based on show size), and regularly releases updated monthly figures. Spotify isn’t quite so forthcoming about its CPM costs, but anecdotal evidence generally puts them around the $25 mark.