Why have we been talking lately about a new golden age for audio?

Hardly anybody would deny that video today is booming. The range of video available has never been so varied, and with the market entry of yet more providers planned, this diversification shows no sign of slowing down. But can the same be said of audio? Where’s all this talk of a new golden age for audio coming from? Radio has been around forever and continues to be there, in the background. Let’s start by getting one thing clear: audio is much more than just radio. Innovations have changed the market and taken it forward – or, more specifically, innovations in the following areas: devices, platforms, and content. The main topic of conversation right now is the development surrounding the second podcast wave. Although podcasts have actually been around since as early as 2004, it’s only in more recent years that consumption of the form has really taken off.

With the growing proliferation of smartphones, mobile consumption of online audio offerings has risen significantly; after all, smartphones are our favourite device by far. Interest in online audio content has also been boosted by smart speakers and new digital applications for cars. These new devices have succeeded in making audio more personal and interactive.

In terms of platforms, it is mainly streaming services like Spotify, Amazon, and Apple Music that have served to expand podcasts’ media portfolio. These are used by almost 80% of people under 30, and by around 40% of the entire population according to an ARD/ZDF online study. These partly ad-free services are even drawing usage time away from other offerings, although they aren’t replacing them entirely – fully ad-compatible conventional offerings continue to be relevant. The usage situations associated with each format are quite different. On the one hand there is the largely mobile usage of streaming services on smartphones, and on the other there is the strongly habitual, mostly passive pattern associated with listening to conventional radio.

The YouTube of podcasts?

When it comes to innovative audio content, one topic is very much at the forefront these days:  podcasts. Interest in the podcast market has been boosted to a new level by recent massive investments by Spotify. The Swedish company’s aim is to become the world’s No. 1 podcast platform. With the acquisition of Gimlet, Anchor, and Parcast, Spotify is not only pursuing the goal of further setting itself apart from the competition with its offering of exclusive content, but also of bringing publishers and creatives directly to the platform. Corresponding self-service solutions for podcast producers are being implemented to this end, which may significantly expand the long tail of the platform’s podcast range.  In terms of distribution channels and findability, the podcast market has traditionally been organised along very diverse lines, with many different ways to search for podcasts and listen to them. Spotify’s investment could alter the market on a fundamental level – and make the service the podcast equivalent of YouTube. This is still a gamble on the future, of course, albeit a very promising one.

Content by opinion leaders, for opinion leaders

Despite the increase among users, podcasts are still by no means a mass phenomenon. As the Reuters Digital News Report 2019 reveals, a good fifth of German online users listen to podcasts at least once a month, whilst many of these are heavy users who listen to them several times a week or even daily. These users tend to be young adults who are well educated and higher earners. Regular podcast users are an attractive target group for brands. They are often people who are strongly interested in a particular topic that shapes opinions in their direct environment, and so functions as a multiplier. Podcast enthusiasts are harder to reach via conventional media, as they watch less linear TV and consume less print media than the average population.

A higher impact through listeners’ undivided attention

One of the biggest opportunities that podcasts represent for advertising is their high impact potential. A key characteristic of the podcast usage situation is direct, intensive contact between speaker and listener. The level of concentration devoted to actively selected content is high, and people often listen attentively and exclusively to podcasts without doing anything else at the same time. Acceptance of advertising among podcast listeners is also higher than it is in the case of most other media, as the advertising is better suited to the usage situation. Native ads recorded by the host are an especially personal form of advertising, tailored to the context. A further plus for advertisers is exclusivity, as a single podcast often features only a small number of advertising messages. At the same time, the resulting lack of scalability is one of the reasons why podcast advertising is presently still unable to deliver sufficient contact for broad reach campaigns.

In terms of usage behaviour, listening to podcasts is also limited with respect to the duration of the content. In contrast to the trend for maximally brief snippets for mobile use on the move, however, on-demand podcast usage is often longer, and listeners’ high levels of interest in the topics discussed mean that their readiness to engage is greater.

New options for audio campaigns

The decentralised way in which podcasts are marketed means that the market is still extremely fragmented at present with respect to advertising opportunities. Uniform standards of measurement are also lacking, which makes formats more difficult to compare. More progress is certainly also needed in terms of booking options and reach definitions if podcasts are to become a more relevant part of media plans.

These issues aside, however, podcast advertising is making new forms of address possible in the audio environment. High-intensity listening means that podcasts are less suitable for “noisy” ad breaks designed to motivate, and more suitable for brand showcasing and development. For the right target groups, this can represent a useful building block in an audio campaign.

And so it may well be that the golden age of the podcast is also coming. With both video and audio booming, the battle for users’ attention is entering a new phase.

In the “Deep Dive” format, experts from the Mediaplus Group immerse themselves in the world of marketing trends and provide in-depth insights into current challenges: how can new trends be categorized socially and economically, and how can problems be addressed with an interdisciplinary approach? Magnus Gebauer, Senior Consultant at Mediaplus, sheds light on this with his contribution to the “share-of-wallet conflict in the subscription economy”.

“Do you really need a cow in order to get the milk?” A simple and logical question posed by Zuora founder Tien Tzuo. Zuora is the world’s leading infrastructure provider of the Subscription Economy. If you believe what Mr. Tzuo says, in a few years’ time there will be no reason to own even one single product. A daring thesis that is well worth a closer look.

The Subscription Economy is a cross-industry phenomenon. Hello Fresh and the Dollar Shave Club represent a multitude of services that are set to turn established markets upside down. Even the more conservative car manufacturers are discovering digital subscription for themselves. Mercedes-Benz is testing its own vehicle subscription with “Mercedes me Flexperience.” Word has spread that this business model pays off. Zuora talks about growth rates of over 300 percent in the last seven years.

New players, new fortune

Even in the world of media and entertainment, there’s no stopping paid subscription offers. Excessive CD and DVD shelves are a thing of the past thanks to Netflix, Spotify and co. Disney +, Apple TV + and newly announced platforms such as Quibi will reinforce this development, and at the same time they are changing the way the entire moving-image market evolves. But why are these digital subscriptions so in demand?

Subscription Economy stands for maximum customer focus. For the consumers of today it’s no longer just about owning a product or using a service. They demand solutions that they can adapt to their needs in a flexible and individual way. There are four major triggers for using paid media subscriptions:

  1. Greater flexibility through the possibility of on-demand usage
  2. Access to high quality and often exclusive content
  3. (Partial) Advertising freedom
  4. Curated/personalized content

Paid Media Subscriptions are a convenient on-off relationship – with 30 days notice.

The share-of-wallet conflict

Netflix and Amazon Prime Video are not only competing with each other – in the fight for part of the available entertainment budget, video-on-demand (VoD) services are also facing subscription offerings from the audio sector as well as digital journalism. Add to that the new subscription offers of the booming gaming industry and countless new players, such as the digital magazine app Readly. More and more services are fighting for users, but there is a cost for paid media subscriptions. The question quickly arises about how many subscriptions a user is willing to sign up for. An internal survey among colleagues at the House of Communication at Serviceplan has shown that two to three different services are used – at a cost of 25 to 35 euros per month. Not a small amount but not nearly enough to be fully sustained by subscription services. The share-of-wallet conflict over the available budget is obvious. In addition, it is clear that there is not one subscriber prototype; from the binge-watcher to the news aficionado to the gaming nerd, everyone uses subscriptions differently.

Is it possible to buy an ad-free life?

Theoretically, one could buy an almost ad-free life through subscription media. Theoretically! In practice, this is simply too expensive for the average user. Added to that, paid media subscriptions do not cover all content by far. The services expand the media portfolio and reduce usage time from other offerings, but don’t completely substitute them. Subscription customers continue to use other media offers that can be advertised. But the fact is that the advertising space, especially for heavy users, is visibly smaller.

Flat rate solutions are not in sight

What the impact will be for the individual media channels can’t be solved with a flat rate. There are far too many differences in the market conditions for the video, audio and digital journalism categories.

Pay-VoD deducts usage time from linear TV, as there are very similar usage motivations here. However, Pay-VoD users can still be reached via ad-supported video channels and will have ad-funded offers in their media portfolio. Music streaming takes less usage time from classic radio than Pay-VoD on linear TV. Above all, music streaming replaces physical sound carriers. Also, music streaming is not ad-free per se. Spotify and Deezer, in addition to the payable accounts, also have advertising, free variants in their portfolio. And what is the reaction of the publishers? Many have adapted their strategies and introduced paid-content models in recent years. In terms of advertising, however, for digital journalism there is no erosion as paywalls do not mean “ad-free”. To be ad-free, users tend to rely on an ad blocker instead of paying for content.

What significance does that have for media strategy?

Through the Subscription Economy, more and more channels are losing valuable ad space. A fact that can’t be ignored, but it’s no reason to throw in the towel. Even if the initial situation becomes more difficult for advertisers, solutions exist.

Advertise in less erosive channels on a more continuous basis

Marketers were used to the fact that moving image and audio media give them almost infinitely scalable reach in a short time. But it is precisely these media that are subject to the strongest erosion phenomena. By contrast, journalistic offers, social media and out-of-home continue to offer attractive advertising space and will therefore grow in the media mix. For those who don’t shy away from the effort, they are also able to penetrate into media that move away from the classic advertising space: influencer marketing, sponsoring, product placement, native audio or in-house productions offer a variety of possibilities for brand staging – and are a welcome support for content producers. In terms of advertising pressure, it is advisable to be moderate but continuously present. This is how you build up depot effects for the brand – the marathon runner clearly beats the sprinter here.

Increasing complexity: the right planning tool question

It is hardly surprising that media planning will become even more complex in the future. Advertisers will need to expand their media mix to reach the right consumers. A broader media mix makes the use of high-end planning tools inevitable. Here’s how to answer these questions: is the range of a channel already exhausted? Is it worth adding another? What are the contact costs and how good is the advertising impact? AI-based planning tools such as the Mediaplus Brand Investor provide appropriate answers.

Back to the beginning

In the future it will also be possible to reach consumers via advertising. However, more levers will need to be set in motion and finer adjustments made. And what about the cow in your own four walls? She still won’t be needed in order to drink a glass of milk. Subscription guru Tien Tzuo is absolutely right. Unlike him, we don’t consider paid subscriptions to be the centrally dominant business model in the medium term. Rather, they are an additional, if not insignificant distribution channel which applies to grocery shopping as well as media consumption.