What’s The Value Of Your Podcast Listener?
Before I started working in the podcast industry I worked in nonprofit marketing. You know what is harder than marketing? Nonprofit Marketing.
Working inside nonprofits was incredibly fulfilling and I had a chance to serve on some of the greatest teams in the industry but it did come with some major hurdles. One of my biggest challenges with working in nonprofit marketing was the lack of understanding around a pretty important metric: CLV. Customer Lifetime Value.
Nonprofits just don’t think about donors this way. Inside a nonprofit we would never analyze what the value of a donor is to the organization because (A) leaders in nonprofits are generally trained within the nonprofit industry (creating a cycle of “this is how we always do it” mentality) and (B) thinking of a donor (someone who is being incredibly generous) as a statistic (CLV) would be viewed as a highly offensive act. If you are tracking with me I just identified the 2 major problems: “we have never done it that way before” + “we don’t believe in viewing our donors as a statistic to be analyzed.”
But, without a strong understanding of CLV, it is nearly impossible to make the most basic marketing decisions like how much we should spend to market/grow the organization. Although we knew this problem existed, we lived in the paralysis of “change is too hard” and continued our way of living.
If you work inside the podcast industry this might feel familiar to you.
Back in 2018 I decided to start a podcast production company. During my time working inside of nonprofits I fell in love with the podcast industry and podcasting was my entryway into the first content type (on-demand audio) that truly connects with an audience that was listening — often for 20+ minutes a week. Social Media had grown overpopulated and “over-algorithmed.” Our email open rates plummeted when Gmail released the dreaded “promotions tab.” But I could create a podcast and reach thousands of people who were actually listening.
In 2020 I decided to leave the nonprofit world and go “all in” with my podcast production company. We were acquired by a fantastic literary agency that believes the future isn’t in one type of content but in the development of the voice of the content creator. The exciting adventure begins.
But here I am in 2021 leading a team that creates chart-topping podcasts and best-in-class audiobooks with the same problem I have faced for over a decade…
We don’t truly understand the value of a listener. And we find ourselves struggling to make wise marketing decisions on behalf of our partners, clients, and original programs. Here is our current thinking on the value of a listener:
Hubspot defines Customer Lifetime Value as, “…the metric that indicates the total revenue a business can reasonably expect from a single customer account.”
And here is the formula they say to follow to calculate it: “To calculate customer lifetime value you need to calculate average purchase value, and then multiply that number by the average purchase frequency rate to determine customer value. Then, once you calculate average customer lifespan, you can multiply that by customer value to determine customer lifetime value.”
Confused yet? Here is the wonderful step-by-step breakdown they give:
The question I am going to try and answer in this article is: What is the value of a podcast listener?
I’m currently doing a bunch of testing on Overcast’s advertising tool for podcasters. Overcast generously allows me to pay them $330 to drive roughly 1,000 “taps” that brings in 60 new subscribers to my podcast. For those good at math that means I will end up paying around $5.50/subscriber. For some of you that may sound astronomically high… for others that may sound like the deal of the century. How do we truly know?
Podcast advertising makes basic calculation of the value of a podcast simple. The CPM (cost per thousand) style of podcast advertising sales is how we will chart a pathway forward here (we’ll use $20 CPM as an independent variable in our equation).
Podcast XYZ gets 10,000 downloads per episode. We will sell 2 midspots at $20CPM, which equates to $400/episode in ad sales. We will publish this podcast once per week, which equates to roughly $23,922.17 in ad sales (assuming small month-to-month download growth). See chart for reference below and use our tool yourself!
Now let’s make a HUGE assumption here (this is worth its own article!) that we can calculate the total number of monthly unique listeners by multiplying our average monthly downloads by 30%. Note here that we are making this “assumption” by looking at our podcast data from millions of downloads run through podtrac and chartable measurement tools.
49,816 (avg downloads/month) * 0.3 = 14,944 unique monthly listeners
Now to the moment of truth… the value of these 14,944 unique listeners (based solely on an advertising model) using this formula: Total Yearly Revenue / Unique Monthly Listeners.
$23,922.17 / 14,944 listeners = $1.60/year
And we will make another HUGE assumption here that we are going to be talented enough to keep a podcast listener for 24 months.
So… Listener Lifetime Value in the advertising only model = $3.20
Based on my Overcast testing above… I am making a terrible marketing decision to spend $5.50/subscriber if the Listener Lifetime Value is $3.20.
The advertising only model is not the way forward if these numbers are true.
What about the major announcement from Apple this week that they are launching a paid subscription service? If we assume that they will set the new market standard we can assume that podcasters and listeners will adopt the normalcy of paying a subscription fee. Let’s try calculating the listener lifetime value of the podcaster who cracks the code on a paid subscription model:
Again we will be taking some HUGE assumptions here. First, let’s assume that the podcaster will charge a flat $4.99/month fee to be a subscriber. Second, let’s assume again that we are talented enough to keep a paid subscriber for 24 months. Here is that breakdown (including some additional expenses that must be taken into consideration):
$4.99/month x 24 months = $119.76
- Apple’s Fee = $26.94 (30% year one, 15% year two)
- Additional Content Creation (production cost) = $1.04/subscriber
So… Lifetime Listener Value of a paid subscriber in this scenario at $91.78.
Based on my Overcast testing above… I am an industry hero who is turning a $5.50/subscriber spend into a Listener Lifetime Value of $91.78. If true, our company is dumping every nickel we have into Overcast as quickly as possible…
So where does the truth live?
I don’t believe the true Listener Lifetime Value is $3 just as much as I don’t believe the Listener Lifetime Value is $90.
At Terra Firma we don’t run our shows with an “Advertising Only” model. It isn’t profitable enough. So we only work with creators who have enough depth to create highly engaging audio content, as well as books, audiobooks, courses, merch, live events, etc. We also have not fully engaged on the paid subscription model for longer than 6–8 months so we have not yet seen the full fruit of going Ad-Free + Paid Subs.
For Terra Firma we currently process the value of a unique listener this way:
- Advertising Only = $1.50–$3.00/yr (we don’t live in this space)
- Advertising+ Product (merch, courses, events, books) = $15-$25/yr
- Ad Free+ Product + Paid Sub = $30-$40/yr
Is our current view of this perfect? Absolutely not.
Does our current view allow us to make smart marketing decisions? Sort of.
But let’s go back to the 2 major problems that caused a lack of innovative thinking in my nonprofit experiences: “we have never done it that way before” + “we don’t believe in viewing our donors (or customers) as a statistic to be analyzed.”
The podcast industry is young. There is no “this is the way we have always done it” and let’s keep it that way! And people like Bryan Barletta are breaking down the technical details of the podcast advertising space and pushing our view of our listeners to new heights.
Although we don’t have our view completely figured out we WON’T get paralyzed by the “change is too hard” mentality. I was scared to write this blog because there are lots of holes in our theories right now but… screw it. I hope it helps someone out there!
Keep testing. Keep learning. Keep Sharing.
We’d love to hear how you process the value of a listener to your podcast. Shoot me an email to casey@contentcapital.com and let me know. For more insights like this follow me on Twitter.
