Streaming audio climbs the charts with marketers, but some want more certainty

Some are finding success with their forays into podcasts and streaming music, but measuring results can be a challenge—and ad prices are rising.

As an experiment this January, the eucalyptus-based bedding brand Sheets & Giggles Inc. spent $30,000 on digital-audio ads and cut out its Facebook and Instagram spending. That was a change from January 2021, when the company spent nearly $200,000 on Facebook and Instagram ads, but nothing on digital audio.

The company’s advertising costs were 75% lower, but sales declined just 10%, said Chief Executive Colin McIntosh. “That was a huge signal for me that we’ve been spending on the wrong channels.”

Some of the main attractions of other advertising options for marketers are under pressure. Apple’s moves to enhance privacy for its mobile users have undermined digital-ad measurement on Facebook and elsewhere. And the big audiences drawn by most traditional television have been dwindling for years.

Against that backdrop, digital-audio audiences are on the upswing. In early 2021, some 68 percent of Americans aged 12 and older said they listened to online audio in the previous month, up from 47% who said the same in 2014, according to surveys conducted by Edison Research and Triton Digital.

“You can’t deny the numbers: It’s a way, undoubtedly, to be able to reach younger audiences, cord-cutters,” said Bryan Master, senior vice president and head of enterprise partnerships at Omnicom Media Group.

Digital-audio advertising hasn’t caught up with traditional radio overall, and advertisers continue to put billions of dollars into the coffers of Facebook and Instagram parent Meta Platforms Inc.

But marketers will spend $5.7 billion on digital-audio ads in the U.S. this year, up 14% from $5 billion last year, according to Magna, a media unit of Interpublic Group of Cos. Traditional radio advertising will total $11.3 million, by comparison, up 3%, Magna said.

While podcasts make up less than a fifth of the digital-audio ad market for major national brands, they were the fastest-growing segment. Major streaming services have been battling for podcast makers and shows that can draw both audiences and advertisers, striking exclusive deals for podcasts from “The Joe Rogan Experience” to “My Favorite Murder.”

Outside small businesses and local ad buying, the trend in digital audio is even more striking: National advertisers working with major media agencies for the first time spent as much on digital audio in the U.S. last year as they did on traditional radio, according to Standard Media Index, whose research captures data from national brands spending with major advertising buying companies.

Such digital-audio spending was a third of overall audio advertising in 2019, SMI said.

The pool of advertisers examined by SMI is often indicative of the market moving forward, said Nicole McCurnin, director of advertising insights at SMI.

The influx of advertisers, among other factors, has driven ad prices higher, however: Podcast CPMs—or the cost of 1,000 audience impressions—rose to $26 in the third quarter of 2021, up from $22 for the same period in 2019, rising above streaming TV ad costs in the process, according to SMI’s data. The entire ad industry saw spend disrupted in 2020, but radio was an especially hard-hit category.

Podcasts, especially unscripted talk shows, can challenge some marketers’ desire for so-called brand safety. Mr. Rogan, who hosts Spotify’s most-listened-to-podcast, apologized earlier this year after a compilation video emerged showing how he and some of his guests used the N-word numerous times on his show.

Measuring the Impact

And then there is the measurement of audiences and ads’ effectiveness, which can be harder for digital audio than it is for other digital ads and some more established media, some experts said.

Advertisers know they need to be trying out digital audio, said Omnicom Media Group’s Mr. Master. “But can they justify and rationalize it, and be confident about their investment? And that’s where I think we still haven’t sort of cracked that code yet,” he said, referring to the broader ad industry.

“The lack of transparency into inventory and audience measurement verification, coupled with the supply-demand [dynamic] resulting in inflated pricing, makes it hard to justify investment,” Mr. Master said.

Marketers are being strategic to maximize their impact—and obsessing over the numbers.

Personal-safety-alarm maker Birdie Love LLC worked with an agency to buy host-read ads on podcasts promoting the company’s She’s Birdie products. It calculated that it got a return of 1.5 to 1.7 times its ad spend of $150,000.

“But I think for us, it was kind of hard to track what kind of triangulation of attribution was there, or if we did that properly,” head of growth Richie Mashiko said.

The work also proved more time intensive. Inventory on popular shows is limited, for one thing, so advertisers have to first find new shows. Then they have to set up discount codes, get the talking points to a host, build webpages tied to the show and finally calculate how well the ads worked.

“I think it’s difficult for small teams,” he said.

Even bigger spenders on podcasts are looking forward to better measurement. The home-security company SimpliSafe Inc. has been advertising on podcasts since 2014 and has become one of the medium’s biggest spenders, according to a 2021 eMarketer report.

“We’d expect there will continue to be opportunities to sharpen the data we get around podcast listens and audience demographics,” Scott Braun, chief growth officer at SimpliSafe, said in an email.