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Nurturing the renaissance in audio advertising

Nurturing the renaissance in audio advertising

The industry needs to work together to convert the promises of online audio advertising into reality, writes IAB Europe’s Marie-Clare Puffett

The audio advertising market is enjoying a renaissance. The traditional FM/AM, analogue and DAB advertising market alone is now worth €6 billion in Europe, and these formats are being supplemented by a new range of digital audio options – from IP radio to music streaming services to podcasts.

The growth of these new audio services is exponential: there are now around 700,000 podcasts, comprising 29 million episodes, up 27 percent from last year. This explosion in content shows little sign of slowing; and new channels, such as connected cars and radio apps in smart speakers, will help increase the opportunities for advertisers to reach listeners.

As a result of new audio services, and the increase in opportunities for such services to be consumed, IAB Europe has forecast that the European digital audio advertising market will grow to around €1.5 billion by 2023 – up from €471 million today.

The foundations for a renaissance

However, audio advertising is still a nascent market. The monetisation of the audio market has not kept pace with the growth in consumption of audio services, while challenges around measurement and attribution have limited its appeal to advertisers. The industry needs to work together to convert the promises of audio advertising into reality.

The foundations are already in place – several core characteristics make digital audio highly attractive for advertisers:

  1. Quality and trust. Audio offers premium inventory closely associated with the editorial content and high transparency of where the ad is shown.
  2. Control. Private marketplaces are a common model for programmatic audio, giving sellers the necessary control they need.
  3. High share of voice. Most audio environments, particularly on mobile devices, offer brands an unbeatable share of voice in a one-to-one audience setting. Ad loads in podcasts are low, and narrator-read ads generate additional connection between advertising and content.
  4. Data-driven creative. Audio provides huge opportunities for creative optimisation at low incremental cost of personalisation due to moderate production costs and seamless combination of audio elements from a ‘toolkit’ into a storyline.

Digital audio currently only accounts for around 3 percent of the total display market excluding social, and the programmatic audio market is still too small to measure with any degree of accuracy. But it is early days and the foundations are strong.

Overcoming the barriers to programmatic audio

For the audio market to fully realise its potential, scale is key. And for that, there will need to be rapid growth in programmatic audio.  However, until the barriers to unlocking programmatic audio are overcome, the audio advertising renaissance will be stuck in first gear. Some of the barriers are:

  1. Honing the data flow. At present, programmatic affords only limited return-path data, analytics and measurement for audio content – particularly when it comes to podcasts. It goes without saying that putting in place detailed data analytics is a critical factor for a strong programmatic market in audio.
  2. Sourcing a large audience. Despite the explosion of content, there’s still a lack of scale. Audience segmentation is already difficult enough on audio, but it will be even more challenging with narrow targeting through programmatic.
  3. Replacing real-time bidding for podcasts. The podcast market differentiates through native ads, where podcasts’ hosts read advertisements on behalf of brands. This approach clashes with the type of real-time bidding in the display and video world. Instead, what may be required is a different implementation of programmatic, from guaranteed deals over real-time auctioning, but not real-time delivery, and wider automation, such as workflow automation.
  4. Overcoming fragmented inventory. Outside of major streaming platforms, inventory in audio is highly fragmented, as it is dispersed among many local service providers – each with their own way of measuring reach. Getting all the inventory together and making it saleable is critical for long-term growth.
  5. Integrating with other media. The true power of audio is not as a stand-alone channel, but as a part of an integrated advertising approach that includes other programmatic channels, such as display and video. This underscores a real need to get the right professionals to manage the complexity that comes with adding audio into the advertising mix.
  6. Creating the right metrics. For programmatic audio to be really taken up at scale, the industry needs to identify and promote audio-specific metrics such as ‘listen through rates’ and ‘mute rates’ so buyers can truly understand the effectiveness of campaigns. This is an educational process that will take some time to complete.

 

The market heats up

While significant barriers remain to the realisation of the programmatic audio market, and therefore scaling the audio market as a whole, there are some indications that key industry players are beginning to make moves on this front. Recent M&A activity speaks to a heated market and suggests that the audio advertising market will reach maturity rapidly.

To give just one example: Spotify, a streaming platform, has recently purchased a podcast network (Gimlet), creator tools for podcasters to build and monetise content (Anchor) and a production agency (Parcast).

The renaissance requires work

The boom in audio content, along with the emergence of new technologies that will give people more time to engage with audio content, is a huge opportunity for advertisers. However, the promised renaissance of the audio advertising market will only occur if the industry works together to define new measurement standards, puts in place the requisite pipes and data analytics tools, and finds a way of uniting fragmented inventory while integrating audio with other programmatic channels.

There’s much work to be done, but from the example of video streaming the industry has a good template for how to achieve these goals. The market is already heating up and when end-to-end audio streaming giants start to breakdown the barriers currently holding the market back, the sky’s the limit.

Marie-Clare Puffett is Marketing & Business Programmes Manager, IAB Europe

Adwanted UK are the audio experts operating at the centre of audio trading, distribution and analytic processing. Contact us for more information on J-ET, Audiotrack or our RAJAR data engine. To access our audio industry directory, visit audioscape.info and to find your new job in audio visit The Media Leader Jobs, a dedicated marketplace for media, advertising and adtech roles.

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