Amazon picks up podcasting for ad revenue

Future. Amazon’s betting big on podcasting — not because of subscription revenue or merchandising, but because of built-in ad revenue, which is expected to blow up in the coming year. As listenership continues to rise at record rates, podcasting may be Amazon’s ticket to competing with Facebook and Google for a bigger piece of the digital ad market… while putting more money in the hands of creators.

Talk revenue to me
Similar to how Prime Video boosts household item sales, Amazon is diving into the podcast business to make money elsewhere: advertising.

• Earlier this summer, Amazon spent $20 million to acquire the hit podcast SmartLess (hosted by Will Arnett, Jason Bateman, and Sean Hayes) for a one-week exclusive run on new episodes before other platforms can distribute them.
• While $20 million seems like a lot for a one-week exclusive, Amazon had its eyes on the advertising revenue — Smartless brings in $6-7 million a year.
• The e-giant also recently acquired the podcast network Wondery for $300 million. Wondery oversees one of the largest ad networks in podcasting, representing over 100 shows.

Unlike typical TV or digital content, podcasts usually come pre-loaded with ads when distributed. That gives a company like Amazon a head-start in collecting ad revenue when they acquire a show or podcast network.

Ads add up
Amazon controls roughly 10% of digital advertising in the U.S., but is still playing catch up with Facebook and Google. Currently, ad revenue falls under Amazon’s “other businesses” funnel, which generated $7 billion last quarter, but that number is set to explode thanks to audio content.

Head of Amazon Music Steve Bloom laid out the company’s strategy succinctly, noting that “to become a player in the audio advertising market for podcasting, [Amazon needs] to be an intellectual property owner. The market for audio ads is growing quickly. Consumer behaviors are evolving, and this is a global opportunity.”

Amazon has reason to be hopeful — the Interactive Advertising Bureau projects that podcasting ad revenue will pass $1 billion this year and will potentially double by next year.