Does Podcast Advertising Actually Work?

Last updated: July 19th, 2023

Podcasts have exploded in popularity over the past few years, becoming a staple in many of our daily routines. As the audience grows, so does the interest from advertisers, wondering if this medium is the golden ticket to reach highly engaged listeners.

But does podcast advertising truly deliver results?

In this post, we’ll delve into how podcast ads are structured, the costs, choosing the right podcast to invest in, whether you should put ads on your own podcast.

Whether you’re a small business owner, a marketing professional, or a curious podcast enthusiast, this conversation promises to shed some light on this intriguing advertising avenue. Let’s dive in!

Popular Podcasts & Advertising

If you’ve ever tuned in to Tim Ferriss’s popular podcast, The Tim Ferriss Show, you’ve probably heard an advertisement for MeUndies, LegalZoom, Athletic Greens or any of the other notable brands that shell out big bucks for as little as 15 seconds of his air time.

But is it worth it? Could podcast advertising really be worth the $37,500 that some observers estimate Ferriss could be making for each sponsored ad? A closer look at the company suggests that the answer is unequivocally yes.

MeUndies, which launched in 2014 and expects to earn $75 million in revenue this year, placed an early bet on podcasts, sponsoring placements on shows by Tim Ferriss, Marc Maron, Anna Faris and Bill Simmons. Not only has the bet paid off to the extent that the company has never had to take on external funding, it continues to commit one-third of its marketing budget to podcast ads.

If we assume that MeUndies’s marketing budget represents 15% of their total revenue – around $11 million – then one-third of that comes out to about $3.71 million per year. I don’t care what you say: If you spend one-third of your marketing budget on something, and you’ve been doing it for years, you’re either really stupid (which clearly isn’t true in this case) or really brilliant.

So I’m going to go ahead and answer the original question for you right now: yes, podcast advertising works. But it doesn’t work for every business or every podcast. To determine whether or not your company could benefit, you need to understand how podcast ads work in the first place.

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Why Podcast Advertising?

Before we jump into specific types of podcast ads, let’s look at why you might want to consider them for your business.

First of all, the number of people listening to podcasts is larger than you might think. According to data compiled by Music Oomph, 44% of the U.S. population has listened to a podcast, while 17% listen weekly:

Spotify’s recent $230 million acquisition of podcasting production house Gimlet Media and Anchor also speaks volumes regarding anticipated growth of the medium.

Podcasting holds the keys to an educated, high-earning audience. As data from Marketing Charts reveals, “Podcast listeners are more likely than the average person to be highly educated, earn a high household income, and to be a professional”:

If your company is attempting to reach consumers who fall into these socioeconomic categories, podcast advertising might be one of your best options.

Finally, one of the biggest perks of podcast advertising is the implicit endorsement of the host. Take Tim Ferriss, for example. The fact that his audience puts so much trust in his recommendations has led to a phenomenon that one of his followers has coined “the hug of death.” In a post on his blog, Ferriss explains:

“In the first ever 5-Bullet Friday newsletter, I recommended my favorite all-purpose sandals, and more than 100,000 people clicked on the link within the first 48 hours (!). This type of click-through assault was nicknamed ‘the hug of death’ by one Facebook fan. It crashes websites, wipes out inventory (e.g. Mizzen+Main, sardines at Whole Foods), creates nutty pricing spikes (e.g. used books going for $1,000 after the Sacca podcast), etc.”

Mizzen+Main’s Kevin Lavelle explained his company’s experience of the hug of death in an article on Medium, writing, “The first three days of our presence on one of Tim Ferriss’ podcasts have been three of our highest grossing sales day ever. What’s more, we’re seeing increasing sales and visitors, not a dropoff.” Sales continued at such an astonishing degree that Lavelle joked on Twitter:

Of course, not all podcast hosts have the kind of star power to cause this effect (and you’re going to pay a lot to work with those that do). But for certain audiences, there’s tremendous value in not just getting in front of a podcast’s audience, but by being associated with its host as well.

How Are Podcast Ads Structured?

So, let’s assume that you’re ready to get started with podcast advertising. One of the first things you need to know is that there are more opportunities out there than the traditional “host reads a 30-second promotional message” structure.

Podcast ads can vary in length from about 15 seconds up to a full minute. They can be read live by the host (called “live read” ads) or they can be pre-produced and then inserted into the final recording after the fact. Dynamic ad insertion technology that allows podcast advertisers to keep their messages fresh and take advantage of features like geotargeting is also on the rise.

Podcast ads can also be placed at different points in the podcast. WordStream’s Brad Smith explains the three most common ad insertion points:

Pre-roll: an ad that gets mentioned at the beginning of a podcast
Mid-roll: an ad that plays in the middle of a podcast
Outro: the last few words of a podcast where the advertiser can slip in a final call to action

Understandably, some of these options are more desirable than others. It’s preferable for most advertisers, for example, to have the host read the promotional message so that it’s imbued with their authority. Advertisers also tend to prefer ads placed during the pre-roll and mid-roll segments, as listeners may tune out any outro segments after they perceive that the host is done sharing the podcast’s content.

All of these factors influence what podcast ads cost.

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What Do Podcast Ads Cost?

Because podcast ads are so variable, it’s difficult to say what they cost on average. However, the data below from podcast advertising platform AdvertiseCast gives us a starting point:

There are a couple different things you’ll notice here. First, podcast ads are typically billed in “CPM,” which means “cost per thousand listeners.” That’s true no matter what length of ad you’re producing or where you plan to insert it into a podcast.

But it’s also interesting to notice that there aren’t any clear trends here. Ad rates don’t necessarily trend upward as average listeners per episode increases. In part, that’s because these numbers are just averages that take both high and low CPMs into account. As another advertising platform, Midroll, notes, “Prices can range from a $18 to $50 CPM, and the highest performing shows can cost more.”

Variability in these numbers also reflects that number of downloads isn’t the only criteria that should factor into your decision when choosing a podcast. A true crime show, for example, might have a huge number of downloads, but its audience may be much broader than a narrowly targeted real estate investing show. Even podcasts with huge audiences can’t command premium rates if their ads don’t deliver results.

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Choosing a Podcast to Promote Your Company

We’ve touched on a few variables that should factor into your decision, including the price you can afford and the size of the audience you’ll reach. However, there are several other issues you’ll want to keep in mind.

First of all, can your business sustain the sudden influx of sales that might result from a podcast placement? Although it’s by no means guaranteed, Ferriss’s “hug of death” can be a real challenge. If you’re shelling out for placements on a top podcast, make sure you have the infrastructure and inventory needed to cope with the demand they can produce.

That being said, keep in mind that the good shows get sold out fast. You aren’t going to email an ads broker and get on The Tim Ferriss Show next week. If a show has availability whenever you want, chances are they’re probably not the right ones to advertise on. If they were, other advertisers would have already locked up those slots.

Further, you don’t just need to find one show to advertise on. If you’re going the route of podcast advertising, you need to keep finding new shows so that your placements can stay fresh.

Repeating the same ad over and over again on the same podcast isn't going to be as effective as continually finding new shows and connecting with new audiences. Share on X

Now, that doesn’t mean you can’t advertise on The Tim Ferriss podcast a few times in a row. Often, you’ll have to commit to a certain number of placements with a single show as part of your advertising package. It’s just that, once you start advertising more than five or 10 times on the same show, you start to see diminishing returns, because most shows have a lot of repeat listeners.

Yes, it’s good for brand awareness and recognition to drill the same message into people over and over again. That’s why I don’t mind doing an ad campaign 2-4 times in a row. But I wouldn’t go out and advertise on a single podcast for a whole year straight – and I don’t recommend that you do, either.

When you’re choosing these shows, keep relevancy at the front of your mind. Success with podcast advertising doesn’t come from getting your ads on the most popular shows. The shows you choose have to be related to your space.

Take our Marketing School podcast:

If we let marketing tools advertise on the show, it’d work well. But if we let people advertise nutritional supplements, it wouldn’t matter how many listeners we have; it’d be useless for the advertisers, because their ads aren’t going to convert.

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Should You Put Ads on Your Podcast?

Speaking of the Marketing School podcast, we get approached pretty frequently about hosting ads. And so far, we haven’t wanted to do any advertising, but it’s interesting to look at the numbers if we did.

Let’s say we were able to price a 30-second spot at $33 CPM. That’s a pretty middle-of-the-road rate based on the data I shared above. We could probably get more than that if we wanted to. And let’s say we decide to put one ad at the beginning and one ad at the end, which gives us a $66 CPM total.

Right now, our show gets about a million downloads each month. Dividing 1 million by 1,000 (since, remember, CPM is measured in cost per thousand listens), gives us 1,000. Multiply that by $66, and our income becomes $66,000 per month or just under $800,000 per year. And that’s only for two ads. If we were to do two 30-second ads in each block, we double that again to more than $1.5 million.

Of course, there’s a lot more than revenue that goes into the decision of whether or not to put ads on a podcast. For Neil and I, integrating ads would involve a lot of headaches in terms of negotiating with advertisers and working their pitches into our material. It’d also get in the way of the listener experience we’ve built, since we want the show to be really focused on delivering high-value material quickly, without a bunch of filler.

But if you run a podcast and you’re thinking about adding ads to it, hopefully the numbers I’ve shared here will give you a starting point for figuring out what you can command in CPM rates (and what your total revenue might be as a result).

Getting Started with Podcast Advertising

Ultimately, podcast advertising is Marketing 101. It works, but the same ground rules as other forms of advertising still apply. You have to know who you’re targeting, and you have to be sure you’re reaching them with the right message.

Figure out all of those elements, and podcasting becomes just one more tool in your advertising arsenal with the potential to make a huge difference in your business.