By Phil Parrish on March 13th, 2018
Digital Audio Advertising 101: The Current State of Digital Audio & Limitations Impacting Faster Growth
It can be argued that no individual media channel is as personal as audio. The songs, podcasts, and news stories we listen to reflect our moods, lifestyles, and activities we partake in. In today’s connected and mobile society, audio moves with us throughout the day. Many of us listen to our favorite artists and news outlets during our morning routine, commute to work, at the office in our headphones, during a workout, or in the background during dinner or as we unwind before bed.
From an advertising perspective, audio doesn’t require our undivided attention to make an impression like a display or video ad. With monthly listenership at over 600 million people across the globe, digital audio is an intimate and immersive channel that is hotter than ever.
In part one of this three-part series, we’ll bring you up to speed with the current state of digital audio advertising and help you understand the impact of programmatic technology in its evolution as an advertising channel. From there, we’ll outline the ad tech limitations of audio advertising and we’ll identify some of the inaccurate perceptions of audio in the minds of brand marketers that are holding the channel back from even more aggressive growth.
In 2017, The Internet Advertising Bureau (IAB) reported that digital audio advertising topped $1.6 billion, up over 45% from $1.1 billion in 2016. Thanks to streaming radio platforms like Spotify, Pandora, and iHeart Radio, music fans are flocking to streaming platforms versus traditional radio to get a more personalized experience and to access all their favorite music in one place.
When looking at the monthly users across streaming audio players in the chart below from Statista, it’s understandable that marketers are shifting ad dollars from traditional radio to digital audio:
Also referred to as programmatic audio, digital radio, and streaming radio advertising, digital audio was initially a manual buying process as marketers had to engage directly with the sales department of platforms like Pandora and Spotify. As demand increased and streaming audio providers began to grow, self-serve digital audio platforms were developed. Today, all industry leading streaming audio providers have opened up inventory programmatically through partnerships with major DSPs.
Despite the 45% year-over-year increase in digital audio ad spend, audio ad buying represents a small fraction of spend compared to programmatic display, video, and native inventory. According to comScore research, consumers in the U.S. spend up to 18% of their time on mobile devices streaming music. Proportionally speaking, if 18% of ad spend on mobile devices was allocated to digital audio channels, the total would exceed $10 billion through mobile in-app advertising alone, which is a far cry from the $1.6 billion invested in digital audio last year.
In a survey conducted with over 100 brand marketers from the Association of National Advertisers (ANA) and released on eMarketer, just 13% of marketers said they bought digital audio ads programmatically:
Even though digital audio investments are increasing, based on data and trends in the broader programmatic marketplace, it seems that the channel has been underutilized.
Why doesn’t digital audio represent a larger portion of the modern marketer’s programmatic advertising budget?
Below we identify the top 5 limitations to executing and measuring digital audio campaigns that have limited its growth programmatically:
1. Brand marketers and agencies don’t fully understand where audio fits into their media plan.
Still in its early stages, brands are testing digital audio on a stand-alone basis instead of it being integrated as an evergreen tactic in media plans. Furthermore, many brands and agencies are evaluating its performance using click-based metrics. As an upper-funnel audience targeting tactic, you can throw click-through rates out the door when assessing the impact of digital audio in your advertising performance. Brands should be focusing on “listen-through-rates” and incorporating audio as an omnichannel, cross-device strategy where marketers can follow digital audio branding with calls to actions in other bottom-funnel tactics like retargeting.
2. Limited scale compared to mobile, video, and native channels
Many digital audio listeners pay a premium for ad-free subscription services, and other consumers purchase the music they listen to via online stores like iTunes, making it difficult for advertisers to reach these users with audio ads. Streaming audio providers control a lot of the ad spend through their self-serve platforms and have been slow to offer larger volumes of their inventory through programmatic platforms.
Lastly, when applying first and third-party audiences to digital audio campaigns, brands and agencies find it difficult to spend their desired budgets compared to more scalable inventory sources like mobile or video channels.
3. Podcast advertising is crucial to the growth of digital audio, yet it’s hard to measure & offers limited programmatic inventory
According to Podcast Insights, over 40% of the U.S. population has listened to a podcast, and approximately 80% of users listen to most or all of each episode they turn on. Podcast streamers are well educated and highly engaged, which makes podcasts a critical factor in the overall growth of digital audio advertising.
Despite that, podcasts have rudimentary analytics and marketers can’t measure impressions and overall performance the way they can in other channels. Only the owner of a podcast player app knows how long a person listened to an episode, where they skipped and stopped in that episode, or if they heard an ad. Brands want to apply the same granular metrics they get in other digital channels to their podcasts buys, and without the same measurement capabilities, marketers restrict spend to podcast inventory which impacts digital audio spending more broadly.
Furthermore, a small percentage of podcast streaming players make inventory accessible through programmatic platforms. With the amount of engaged podcast listeners on the rise, ad tech companies will invest more dollars towards building technology integrations with podcast players to provide advertisers with easy access to targeting within this channel.
4. Ad tech platforms were not engineered for audio advertising
With digital audio ad spend representing a small portion of the entire programmatic pie, DSPs have steered engineering resources and investment towards other channels like mobile, video, native, and even Connected TV.
The industry’s underlying technology (e.g. ad servers, ad exchanges, DSPs, etc.) was built for programmatic display inventory, which is apples-to-oranges compared to digital audio. Streaming audio providers have had to build a lot of the ad tech themselves, and that’s not necessarily their strong suit. Many of the self-serve advertising platforms developed by streaming audio providers are clunky and lack many of the common features offered by DSPs. DSP companies (it can be argued) haven’t fully embraced the nuances of digital audio as an inventory source. This needs to change for digital audio to grow at a faster rate, but we at PrograMetrix are confident it’s going to happen!
5. Confusion about creative specifications & ad formats for audio advertising
Modern marketers who have an evergreen programmatic campaign strategy can recite standard display ad specs in their sleep. Even mobile, video, and some native formats are mainstream in the industry today. There is less consensus in the industry about the specs for digital audio assets and companion banners than there is for ad specs across mobile, video, and native.
Until there is a shared set of standards in the industry where everyone is speaking the same language, audio ad specs will limit the growth of the channel. More research and strategy needs to be conducted by creative agencies and brands to better understand the development of a compelling audio ad, with supporting companion assets, that’s designed for the digital listener. Not all of the focus should be on the creative agencies and brands though. DSPs and ad serving technologies need to be nudged to build better technology for digital audio formats.
Though limitations exist, the advantages of implementing digital audio in the media plan, and the room for growth, far outweighs some of the issues listed above. Many of the current limitations will turn into strategic opportunities, scalable offerings, and innovative solutions in the not too distant future for audio advertising.
With that in mind, come back and read part two of our digital audio series to learn about the top 10 you should implement digital audio in your media plan and the key advantages the channel provides to the forward-thinking marketer.
If any of the limitations we identified resonate with you, or if you need help understanding where digital audio fits into your plan and how to measure it, feel free to contact us and our team will be happy to help!