Part 3a: Why Audio Is the Untapped Corner of Media We Should All be Talking About

The power of [audio] is not that it speaks to millions, but that it speaks intimately and privately to each one of those millions. — Hallie Flanagan

Radio is the theater of the mind; television is the theater of the mindless. — Steve Allen

Moving slightly away from the “COVID-shift” theme that has been the undercurrent of this series, I want to discuss what’s been a growing wave in media over the last few years: audio media.

It’s hard to imagine the world moving towards an entertainment medium that engages fewer senses. Why would you sit there listening to audio when you can watch a video that includes audio? Why would you just watch a video when you can experience that video via VR? It seems logical to assume that the world is moving away from pure audio content the way it moved away from “talkies” to “movies”.

However, my experience, and broader market data, do not reflect this reality. My first exposure to non-musical audio media came via the first Serial installment. I remember being so engrossed in the series that I would listen to it at the gym and forget to keep working out. I would get lost in the story and just sit there, listening. The same thing happened with Hardcore History’s Blueprint for Armageddon. I have a hard time sitting through 2-hour movies, but 4 hours of Blueprint for Armageddon seemed to breeze by.

There are a few reasons I can think of to explain the relative attractiveness of audio content. First, audio content is mostly passive. You can listen while driving, walking, exercising, cooking, etc. Because you only need one of your senses to consume audio content, your full, undivided attention is not required (more on that below). Second, there’s something for everyone. Given the lower barriers for audio content creation relative to video (e.g. no video equipment needs, guests can be hosted remotely), individuals can create niche content interesting to them without worrying about finding an audience to justify the time/money investment. Finally, audio engages imagination and emotions in a way video media does not.

Beyond my own anecdotal evidence, we’ve seen a proliferation of audio entertainment on everything from Philosophy to Technology to True Crime. There are now over 800,000 active podcasts with over 54 million podcast episodes currently available worldwide. Because of the relatively low barriers to entry a record 192,000 new podcasts have been launched in 2019 alone. The appeal of audio media has shown to be incredibly widespread: 55% of people in the US have listened to a podcast (up from 27% in 2013), with 104M listening every single month. M13 (a top consumer tech fund in Los Angeles) recently described this trend as a Cambrian Moment. This growth has also been supported further by adjacent trends in the consumer electronics space: As of 2019 an estimated 35 percent of U.S. households are equipped with at least one smart speaker and by 2025 forecasts suggest that this penetration rate will increase to around 75 percent.

Players like Spotify and Amazon have taken notice — in January 2019, Spotify acquired podcast publisher Gimlet Media. Soon afterwards, Spotify acquired Anchor, which provides a tech platform to help creators launch podcasts. Amazon was even more ahead of the game, acquiring Audible for $300M way back in 2008.

Despite the above, the audio space hasn’t been 100% smooth sailing. Lately, podcasting has taken a bit of a dip due to the fact that people have stopped commuting during COVID. Sarah Tavel discusses this in an excellent article on consumer attention (shoutout to Kate Armstrong at Cobalt Capital for sending this over), asserting that while audio media doesn’t take up our full attention, it does often require the user to be engaged in another “porous rock” task, such as commuting, simultaneously. This has made investors skittish, but the reality is that people are eventually going to commute again in some form or fashion; “porous rock” tasks as Sarah described will snap back, and individuals will continue to seek entertainment during those filler moments in the day. That said, a trend that should make audio media less dependent on complementary activities is the move towards short-form; but for this to truly take off, users need to be able to interact with the audio content in a way that enables interaction, such as clipping, editing, and sharing (mimicking their interaction with video media).

Now, given the level of demand and consumption in the market, the audio media market size must be massive, right? Well…no…at least not yet. There are still a lot of kinks to work out. Audra Gold describes the problem in the following way:

“The audio industry has been completely left behind by tech innovators and as a result, the business models are archaic despite the explosion of audio content. There is currently no centralized Youtube-type hub that exists where any type of audio content can be uploaded, shared, discovered, and go viral. Podcasts, the biggest emerging media format, still need to be downloaded to consume and there is basically zero real-time programmatic inventory. This mismatch between demand and the digital audio ecosystem has created the biggest opportunity in consumer media today.”

To drive Audra’s point home: the podcast industry, despite its growth rate and popularity, will only generate $1Bn by 2021. Podcasts currently monetize at $0.1 per listener hour, which is 10x less than radio monetization.

What’s going on? Well, the audio industry still largely operates the same way it has since the inception of radio broadcasting and has not quite figured out the right way to monetize. While video has customizable, interactive content and programmatic inventory that can drive actionable attribution data, this type of ad inventory remains non-existent for audio.

What the audio industry has turned to in lieu of a programmatic offering is native advertising and monthly subscription models. If you’ve ever listened to a podcast, I’m sure you’ve heard (and subsequently skipped) the sponsored content that kicks off many shows. Going back to my earlier claim about today’s consumer demanding highly personalized, interactive content in order to maximize monetization, it’s no surprise audio is struggling to monetize. There is nothing less personalized, less interactive, than a generic ad blast at the start of a podcast. Audra at Vurbl states that:

“for the large advertisers with real dollars to spend, the lack of real time buying, measurement and attribution makes buying audio at scale a non-starter. These stitched in and native audio ads are not measurable in terms of tracking real ROI; they generate imprecise data, which performance marketers won’t work with.”

The graphs below bring this point to life:

Now, to this point I’ve focused primarily on podcasts and audiobooks as representative of audio media, but this overlooks the MASSIVE amount of audio content out there that doesn’t fall into those two buckets (e.g. audio from speeches, radio broadcasts, tv shows). Today, if you wanted to share a specific audio clip, most of the time this audio content needs to be shared in video format. If you want to share a specific segment of a podcast, there’s almost no way to simply cut and share the audio the way you can with video. If you want to search, recommend, or share non-digitally native audio there is no consolidated repository to turn to that even closely matches what is available for video.

This is a massive opportunity that has not been capitalized on to-date, particularly with regards to enabling creators to generate short-form user-generated content — the gold standard for engagement and monetization. As stated above, audio is still relatively archaic and underdeveloped in this regard when compared to other mediums like text and video. Monetization and interactivity are just two pieces of the puzzle — in part b of this last installment, I’ll discuss the startups that are tackling the specturm of opportunities (and inefficiencies) rampant in this nascent space (e.g. search, discovery, attribution, distribution).

Last article: Part 2: The Creator Economy Gold Rush

Next article: Part 3b: 5 Interesting Opportunities (and a Few New Ideas) for Audio Media Investors and Entrepreneurs