Protecting CPM’s in Podcasts: Programmatic Ads & Its Double-Edged Sword

Protecting CPM’s in Podcasts: Programmatic Ads & Its Double-Edged Sword

As we’ve watched digital advertising become devalued over the last few years and the adverse impact that national network buys have had on radio, podcast advertising is at the crossroads on protecting CPMS’s. While programmatic ad insertions certainly will drive revenues, the industry must walk a tight-rope to protect rate-integrity, especially when it comes to ‘live organic reads’ which still differentiates our industry from other mediums.

Dynamic Ad Insertions And Its Double Edged Sword

Dynamic ad insertions, while providing ‘highly targeted’ messaging, has devalued digital advertising to a level in which many publishers are reaping what they sow. They all wanted a seat at the table yet collectively they’ve helped drive down digital ad rates. The depreciation of digital display advertising CPMs over the last few years has been mindblowing.

Programmatic buyers are now steering the ship, not publishers. Radio is experiencing this exact same thing on the national and network buying level, attracting bottom-feeder rates that are adversely impacting the industry.

Why This Matters?

  • The podcast industry still has an opportunity to control the impact of programmatic campaigns
  • Digital advertising is at the crossroads with ad-blocking technology, bots, and the devaluing of rates that have adversely impacted many publishers.
  • Digital technology companies and ad agencies reap the benefits of skimming margins off of programmatic advertising campaigns. These companies have diluted rates, caring only about delivery, delivery, delivery and completely discounting the user experience.
  • The charm of podcast advertising remains that it is not oversaturated with advertisers
  • Native advertising trumps programmatic, and podcast advertising is the purest form of native advertising

Algorithmic Platforms Drive Revenues & Dilute Them Simultaneously

It’s exciting that technology is moving the podcast industry towards an automated algorithmic platform of ad-buying. The digital buying community will embrace this. However, if we don’t protect CPM’s, particularly for live reads, we will watch our endearing industry dilute itself the same way many online publishers have already done so.

Ask any major online publisher how the dilution of the digital advertising space has adversely impacted their business. The price-per-banner rate they get today is exceptionally lower than it was 5 years ago. A deeper dive into the ultimate affect programmatic advertising has had on publishers highlights the ill-fated consequence of giving up control to programmatic buyers.

Radio Victimized By National & Network Buys

All the podcast industry has to do is look over their shoulder at the impact this type of buying has had on the radio industry. The word ‘rate integrity’ is virtually meaningless now when it comes to a national and network buys. Radio has been victimized as they’ve all been pushed around by national buyers, pushing down rates to levels where it almost makes sense to walk away.

I can use less colorful language to express what has happened, but I’ll choose to take the high road. Let’s just say they’ve been ‘easy’ to get over on by the buyers that now control them. Again, falling victim to the buyers that make money on campaigns is what has cost Radio. Hopefully, the podcast industry will not fall victim to these same mistakes.

Industry leaders must step up together and control its destiny rather than be controlled by the buyers and/or the technology companies delivering the campaigns. I particularly appreciate that fact that podcast companies like Panoply have kept their CPM’s high, even via their dynamically inserted Megaphone Target Marketplace platform.

Excess Inventory Needs Sold But At What Cost?

We agree that there is a place for programmatic inventory in the podcast industry. But I’m most concerned about protecting the integrity of ‘live reads’ vs. selling out the excess inventory available in podcasts.

As Acast’s Chief Revenue Officer Ross Adams said in an article in earlier last summer:

Many of them (podcasts/shows) don’t have large enough audiences to either attract or make much money from custom sponsorships. With the programmatic marketplace, they don’t have to spend any time or resources dealing with advertising — the ads will just be placed automatically.“Just release your show and know that you’re starting to build a revenue stream,”

Trust me, I am all about driving revenue for content creators, networks, and publishers. But as mentioned earlier, the charm of a podcast still remains that it is not oversaturated with advertisers. And I don’t think it’s as simple as ‘just releasing your show’ to programmatic advertising and see what happens next. It has to be controlled chaos vs. the wild wild west.

The key will be having industry leaders protect what rates they accept on these platforms. But the industry must be in sync with each other or else they’ll also turn advertising units into a depreciating commodity. It will be a dog-eat dog world, devaluing the lean-in listening experience.

If you can hold rates above a $5 to $6 CPM for excess inventory, it may work. But once you start diluting rates below these levels, say goodbye to sustainable profits and hello to saturation that coincides with a less enjoyable listening experience.

Dynamic Ad-Insertions Makes Sense for Long-Tail Shows & Digital Buyers

Targeting major shows with programmatic advertising makes sense, especially for shows that have massive reach and long-tales (like Serial or any of the top podcasts that have recurring listenership dating far back). But we must limit the threshold of where these rates land or ‘buyers’ and ‘technology companies’ will once again take control of another industry, lining their pockets at the expense of publishers.

Programmatic will be an asset to podcast publishers aggregating their networks and capitalizing on excess inventory, however, they must utilize it in a way that doesn’t dilute the medium or over-saturate their shows simply for additional revenues.

Having the ability to target via dynamic ad insertions, the way Spotify & Pandora can (age, gender, interests, etc), will also attract the digital buying community, finally choosing to give podcast advertising a chance to compete with a digital buy.

Responsibility Is The Key But History Typically Repeats Itself

Finally, with programmatic advertising comes great responsibility. Will industry leaders choose to dilute rates simply for short term revenue spikes? Will independents align with technology companies promising revenues through cheap, bottom feeder programmatic rates? Will ‘middlemen’ continue to make money off the back of publishers?

The key: Do not fall victim to the mistakes we’ve seen simply by accepting bottom-feeder rates to fill inventory gaps. We’ve seen this in all major media mediums, both traditional and digital.

Axios Media Trends summed it up brilliantly:

News publishers and advertisers are both economically incentivized at this point to cut out the “middle men” in the digital advertising supply chain. Procter & Gamble Chief Brand officer Marc Pritchard told Axios last week he thinks only 40% of ad dollars make it to publishers after ads are done going through ad tech middle men

Retaining 40% is pathetic. It’s time to bring control back to the publishers and content curators.

But history typically repeats itself…and greed typically trumps intelligence.

Everyone is going to want a seat at the programmatic table…but at what cost?

And that’s why I’m worried.