What I Learned During My Audio Advertising Research

Audio advertising is more challenging than it appears. Not only for the advertisers but for the operators.

Last year we surveyed our members about audio advertising and we were surprised to learn how frustrating they were with the tech ecosystem surrounding audio.

Some of the challenges we uncovered from the members that had experience with audio were:

  • Expensive
  • Limited Scale
  • Measurement
  • Brand Safety
  • Lack of Transparency
  • Brand Suitability Tools
  • Podcasts required a lot of coordination

These challenges are definitely holding the channel back from the explosion many expected in 2022 and which carried over to 2023. The expensive cost to the channel seemed to be due to the limited number of buying options brands and agencies were comfortable buying from. From our discussions with our members, most were buying from one or a few of these vendors:

  • Spotify
  • Pandora
  • iHeart
  • The Trade Desk

There were certainly a few others but with consolidation, these four seem to be the leaders, at least for now. Given the plethora of digital radio stations and streaming services, combined with over 3 Million podcasts, you wouldn’t think scale would be an issue. You would also think that with that much inventory, the CPM’s would be inexpensive. Most advertisers gravitate to Spotify because its a safe buy and the largest organization with a focus on digital audio. However, you will pay a premium for their experience and brand. Let’s peel back each challenge and examine it:

  • Expensive: It will take a little bit of effort to get an apples to apples comparison on cost. For starters, sometimes you are buying unique inventory so if the content is important to you, only you can determine its value. If you are buying an audience, you have more options than you might realize. Each platform has different fee structures which can confuse your analysis. So be sure to understand all the fees associated with buying inventory on a platform. Some have access or platform fees plus base CPM’s. Then you need to layer on the cost for data, targeting, measurement, brand safety, ad serving, creative, etc… Sometimes these fees are clear and transparent and sometimes they are hidden. You total fees have a direct impact on performance so make sure you are accounting for all the fees before passing judgement.
    • For example, a publisher may be willing to sell their inventory for a $6 CPM. The SSP may charge them 30% ($1.80) to sell their inventory on their platform. To access this inventory, a buyer will need to go through a DSP like TTD. The DSP will mark-up the inventory another 20% so now we are at $9.36. The DSP is likely to layer on fees for targeting, measurement, brand safety, etc… These fees can take the CPM up to $13 in addition to the platform fee (percentage of media) that the DSP charges. This can be 20% so now that CPM comes out to $15.60. The CPM has now more than doubled. The point is, there is a lot to consider before you can compare on price.
  • Scale: Sure, each platform is limited to inventory they have access to but you need to understand where all of their inventory is coming from and why they might be limited. For example, The Trade Desk doesn’t out a big focus on audio as a channel. It only accounts for about 2% of their revenue so they are better served to invest money and resources into display and video. Because of this, their inventory only comes from SSP’s. The problem with only relying on SSP’s in audio is that not all the programmatic inventory is available through SSP’s. The SSP’s charge a sell-side fee to the publishers just to make their inventory available on their platform. Publishers are sometimes saving their best inventory and selling it through other channels or DSP’s that don’t charge a sell-side fee.
  • Add Ons: Platforms are simply facilitators so if you want an independent view on measurement, brands safety, and data for targeting, you will need to leverage 3rd parties. You expect all of these companies to charge for their services so look at your options and choose the ones best suited for your brand. The larger question will come down to cost vs value. Many of the platforms will mark-up these add-ons so the same data/service might seem like it costs the same but the real cost will change based on the markup. Look for platforms that don’t markup others services. I would consider this a form of double dipping so negotiate it away or walk away.

Media Consolidation is something that I hear often from brands and agencies. In theory, this concept makes sense. Buy all your media via one platform so you can build cohesive campaigns that target your ideal customers. Well there isn’t one place where you can buy all the available inventory across all channels so there may be benefits from working with multiple platforms. Regardless of your perspective on this topic in general, it all breaks down with audio. Audio is a different animal. Users interact differently. Brands target differently. The technology used to deliver, track, and measure is different. More simply, there isn’t a cookie to track users from a display ad to a video ad to an audio ad. There is absolutely no reason for a brand to buy audio via The Trade Desk because that’s where they buy everything else. If you are serious about audio, buy it from platforms that are also serious about audio.

Our journey ultimately led us to Audiohook. A company born out of necessity. The CEO, Jordan Bentley, had been a media buyer earlier in his career and more recently in audio specifically. He saw a lot of challenges within the industry that needed to be addressed if the channel was going to grow as it was expected to. It is estimated that there are between 3 and 4 Million podcasts today. However, more than half the available ad inventory goes unsold. Why? Great question which we wondered as well. Apparently, many of the content producers are reluctant to sell their inventory through SSP’s because they charge a heavy sell-side fee which I already addressed. Audiohook doesn’t markup anything. That $13 CPM inventory on another DSP (math above) will cost $6 on Audiohook. How do they make money? Another great question. Audiohook will charge the advertiser a platform fee and that’s it. Their average platform fee is 15% of media spend (varies on spend/volume). So that $6 CPM is still only $7.20, less than half the other DSP’s. The publisher can increase the CPM to $7 if they want and everyone still wins, by a lot. This means your advertising performance can double by simply buying it via Audiohook. Better yet, buy twice as much inventory and grow your business.

Price isn’t everything but it is a lot. However, Audiohook has more scale than anyone else because all they do is audio. This allows them to focus on aggregating all the available ad supported content and thensome. They have built in measurement and brand safety tools but advertisers are welcome to bring in their own without added platform fees. Audiohook prides itself on transparency from inventory to pricing to bidstream data, they will show advertisers everything. All of these benefits apply to podcasts, streaming audio, and radio,

If you truly want to make audio work for your brand(s), you need to take a look at Audiohook. They are honest, independent, and sincere about helping advertisers succeed in this channel. Audio is all they do so they have a vested interest in making the channel work for brands so that budgets continue to increase and the channel can grow. You shouldn’t go to McDonalds for a salad, Starbucks for tea, 7-11 for a meal, or anywhere else for audio advertising…

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