If you remember what old-school banner ads looked like in the 1990s, you know that digital advertising has come a long way. From the early days of display ads to viewability standards for video, growth in digital ad spend has always been driven by the ability to reach specific audiences—and to measure the efficacy of the ads they see.
Audio advertising, however, has been a different story. Until recently, podcasts accounted for a small fraction of overall digital ad spend. But new data from eMarketer shows that US podcast ad spending will surpass $2 billion by 2023. Podcasts now reach more than one-third of the US population for more than 50 minutes per day, and recent ad tech innovation has given advertisers the ability to scale, measure, and effectively target podcast listeners all over the world.
The podcast revolution is officially here, and it’s been years in the making. The Evolution of Podcast Advertising breaks down the history of the medium, the challenges for advertisers, and what the future of podcast innovation looks like. Here’s a brief history of the advertising channel that’s projected to reach 504 million global listeners by 2024:
2004–2012: Digital formats, analog advertising
In the early days of podcasting, podcast creators and publishers began to monetize their content by simply recording their ad reads directly into the audio file for the specific podcast episode at hand. These spots became known across the podcast industry as “baked-in” or “burned-in” ads. For advertisers, baked-in ads represented a scrappy but unique opportunity to align with a trusted podcast or host—true influencer marketing.
However, baked-in ads presented some challenges. First, advertisers couldn't target specific audiences with certainty, instead reaching generalized demos based on polls. Second, with the ads baked or burned into the audio files, advertisers couldn’t remove stale ad creative.
2013–2019: Dynamic ad insertion (DAI) marks a step up
Podcast listening continued to see a steady rise in listenership. Then in 2013, the podcast advertising industry took a step forward with the introduction of DAI. With DAI, an advertiser’s ad read is recorded and produced separately from the podcast episode and the ad is inserted into the content at the time of download by the podcast’s hosting platform. This meant for the first time, podcast advertisers could access basic targeting, control the insertion and refreshing of ad creative, and run ads across multiple episodes or podcasts.
By 2020, however, the shift from downloading to streaming podcasts began to take hold. Enter: Streaming Ad Insertion (SAI) by Spotify.
2020–Present: Upleveling industry standards with SAI
So, how does SAI work? Similar to DAI, a listener presses play on a podcast episode that has empty ad slots ready for ad insertion. However, rather than counting all impressions at the point of download, Spotify is able to record an ad impression in real-time, as soon as the ad starts playing. That means for the first time ever, podcast advertisers can get insight into confirmed ad impressions. They can have confidence knowing that their ads were heard, instead of simply using downloads as a listening proxy.
With podcasts on the rise and new innovation in podcast ads, marketers are beginning to see the channel as an essential part of their media buys. It helps them reach a young, educated, and affluent audience at scale, through a medium that demands attention. As podcasting matures, marketers are beginning to ask for more accountability of their media spend, along with tools that offer the same level of sophistication advertisers have enjoyed across the rest of digital media.
To learn more about the podcast opportunity and best practices, download Spotify’s The Evolution of Podcast Advertising whitepaper.
—The Spotify Advertising team