Programmatic audio had a growth spurt in 2023, but it still comes up short compared to other digital media.
That disparity is especially stark in podcasting. Programmatic comprises 11% of podcast revenue in 2023, up from 2% in 2021 and 5% in 2022, according to an October podcast ad revenue study from the IAB. But for other digital media channels, like social and CTV, programmatic represents 87% of revenue on average.
Still, if programmatic audio keeps chugging along in its growth, it could make up a sizable share of audio in a few years’ time.
“My suspicion is that programmatic is going to continue to double and continue on this trajectory for a couple more years,” said Kurt Kaufer, CEO and chief growth officer of audio agency Ad Results Media (ARM).
Singing from a different songbook
Within audio, podcasts are dawdling in their programmatic adoption compared to their streaming audio peers. Programmatic activation is already “very mature” in streaming audio, said Matt Shapo, director of digital audio and video at the IAB.
“The streaming audio side has certainly progressed further. However, the partners are keeping their cards closer to their chest, from a streaming audio perspective,” said Rebekah Shalit, group director of digital and programmatic partnerships and innovation at Dentsu. “There’s fewer options when it comes to programmatic.”
Streaming audio is “a much smaller part of the mix in terms of what we’re buying programmatically,” ARM’s Kaufer said. “Ultimately, we would buy that directly with the networks versus having to buy that via the DSP.”
Even though streaming music and podcasts offer similar listening experiences, they’re delivered in different ways (streaming versus progressive download). If users are logged in and streaming songs on Spotify or YouTube Music, advertisers can access first-party listener data, such as who’s listening and what they’re listening to at any given time. They can then use these identifiers to activate the streaming media programmatically. “It’s just like digital display,” Shapo said.
Podcasting lacks that immediacy because “a very small fraction” of podcasting happens via a real-time streaming player, Shapo said. Instead, progressive downloads – meaning audio files that download little by little in the background but that users can listen to as soon as the file starts to download – are the norm.
“We’ve got a really close approximation between downloads and listens,” Shapo said, but advertisers can’t see when someone listens to a podcast, only whether they completed a full or partial download. This download-based model poses measurement challenges.
“Last-click attribution models still reign in terms of measurement campaigns. It has been a detriment to many forms of advertising and digital media,” including audio, which often has no companion banner for someone to click on, said Anne Frisbie, SVP of global business development at SiriusXM-owned digital audio ad platform AdsWizz. “As cookies go away, that model is under siege, so it’ll be interesting as it plays out.”
Host with the most
One of the greatest obstacles to programmatic audio adoption is the industry’s attachment to host-read ads.
Baked-in, host-read ads woven into the fabric of a podcast as an indelible part of an episode’s audio file remain an integral piece of the podcast ad ecosystem because they perform so well, ARM’s Kaufer said.
Host-read ads are particularly popular among DTC and direct-response advertisers that have historically backed podcasts. But podcast publishers have dragged their feet on opening inventory to programmatic. They don’t want to compromise the listener experience or the host/listener relationship, according to multiple audio industry players.
A common buyer concern is avoiding “the proverbial race to the bottom in terms of rates and CPMs,” Shapo said.
But as more national enterprise brands advertise on podcasts, programmatic often comes with the territory. It offers scale and hits the same targeting and measurement capabilities offered by digital or CTV, Kaufer said.
“In the not-too-distant future, programmatic is probably going to catch up with our host-read revenue,” said Dave Hanley, chief revenue officer at podcast-hosting service Libsyn. He estimates that Libsyn’s programmatic audio business will grow twice as fast as its host-read business next year.
“Host reads and programmatic aren’t necessarily antitheses of each other,” Frisbie said. They could run together using programmatic guaranteed. But that hasn’t been the case – yet.
Automation has left the station
If the comfort and familiarity of host-read ads are holding programmatic audio back, the increasing popularity of dynamically inserted arts is contributing to programmatic audio’s rise.
Dynamic ad insertion allows podcasters to automatically insert and swap out pre-roll, mid-roll or post-roll ads. Podcasters can update ads across a show’s back catalog to target new listeners or people listening to the show again.
Dynamically inserted ads represented 92% of 2022 podcast ad revenues, close to double its 48% share in 2019, according to the October IAB report. (The report did not include 2023 forecast data because the sample size was too small.) And though many dynamically inserted ads aren’t currently bought or sold programmatically, the capability is there.
For independent publishers that aren’t big enough to sell host-read ads, programmatic allows them to monetize their podcasts, Hanley said. For podcasters with host-read ads, Libsyn takes a “tiered approach,” selling host-read ads first direct to advertisers and selling the rest of the inventory programmatically, he said. This approach tends to smooth out the seasonality and “lumpiness” of ad demand, making for more predictable earnings.
If you build it
Aside from dynamic ad insertion, the infrastructure to support programmatic audio is still a work in progress.
DSPs and SSPs “live on legacy technology, and podcasting isn’t something they were born to do,” said Elli Dimitroulakos, global head of ad innovation at podcast monetization and distribution platform Acast.
The “bundling of many audio marketplaces in the DSPs and SSPs” – combining audio types with different pricing structures, goals and performance – was a barrier of entry for programmatic, Dimitroulakos said. When buying supply through a DSP, buyers couldn’t differentiate between streaming audio and podcasts or linear versus streaming radio. “It was all one,” she said.
Previously, the only content parameters someone could see in a DSP’s bidstream was IAB’s 12 general content categories, Dimitroulakos said. Buyers can now use content signals like genre, show, episode title and keywords to transact on podcasting programmatically. They can also employ frequency capping across many shows and publishers.
If the DSP doesn’t allow targeting, the SSP can add it in, Libsyn’s Hanley said, in certain states or by audience characteristics such as age, gender or interest in natural food products.
The SSP can also add brand safety parameters, addressing an ongoing concern for buyers. Plus, AI transcription and episode-level contextual analysis tools from companies like Barometer and Sounder make media planners and buyers feel more confident and comfortable buying in a DSP, ARM’s Kaufer said.
More nuanced contextual tools allow buyers to take tone, inflection and connotations into account. “And it’s considering the suitability of the show relative to the brand ethos,” Kaufer said.
Direct dealings
Audio is already a small, scrappy underdog compared to its shinier cousins, like CTV. The US media market has a video-centric mentality and underinvests in audio compared to audio-friendly UK and Europe, AdsWizz’s Frisbie said. And programmatic audio is only a subset of that small market, which the IAB predicts will double to about $4 billion by 2025. Still, programmatic audio is growing in importance.
“Programmatic buying belongs in every media plan,” Dentsu’s Shalit said. “But our teams are still trying to find the right balance between programmatic and direct activation.”
Most of Dentsu’s programmatic audio deals are programmatic guaranteed and private marketplace, Shalit said. Sponsorships or custom activations will always be direct sold.
Programmatic guaranteed and private marketplace deals comprise most of programmatic audio. “Historically, it has been overwhelmingly PMP,” the IAB’s Shapo said.
For instance, AdsWizz, whose parent company, SiriusXM, reported a 97% YOY increase in programmatic podcasting in its Q3 earnings, doesn’t offer open-exchange buying. “I don’t think we’re ready for that,” Frisbie said. “Maybe that will change in five years.”
Private buys can also protect the listener experience by tightly controlling the ad inventory users will hear. “It took us years to get really premium inventory that wanted to participate,” she said. “I don’t think just throwing it open to the wild is going to help you.”
Next year probably isn’t the year of programmatic audio. But we’ve come a long way, baby.
