The podcast industry is booming; with over 850,000 active podcasts and over 30 million episodes available online, resulting in more than half of the U.S. population over the age of 12 listening to podcasts, and one-third of Americans listen at least monthly. The global podcast industry is expected to be worth $60.5 billion by 2027, while advertising spend is expected to grow 45% this year to $1.13 billion in the U.S., giving podcasts a 21% share of the U.S. digital radio ad market.
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These are our 3 favorite podcast investments which we think could profit from this increase in popularity and ad revenue for years to come.
1. Spotify
Spotify (NYSE: SPOT) entered the podcast space in 2015 and is now destined to become the industry leader; aggressively designating $500 million since 2019 to develop its podcast segment by acquiring broadcasting companies and partnering with existing shows. It acquired Gimlet Media, a podcast studio, and Anchor, a podcasting app, for $200 million and $140 million, respectively. Spotify has exclusively partnered with Kim Kardashian and Joe Rogan, who grosses 190 million listeners per month, as Spotify hopes that this will both attract fresh listeners as well as help with retention.
Spotify’s successful combination of podcasts and music on its app is extremely powerful, making user acquisition easier and reducing subscriber churn to competing platforms. User engagement with audio content on the app is steadily increasing — 22% of total monthly active users engaged with podcast content in Q3 2020, compared to 21% in Q2, and 19% in Q1. In November 2020, Spotify acquired Megaphone, an ad tech company, and will open this technology to all podcasts on Spotify to get more in-depth analytics on its in-app advertisements. This move will help Spotify increase ad revenue, and we will hopefully see the segment become profitable within the coming years, making this company a long-term move for those looking to invest in the podcast space.
2. Apple
Apple (NASDAQ: AAPL) has been a pioneer in making podcasting mainstream by supporting them since 2005 and has continued developing its podcast segment to cater to the recent rise in demand. The company has taken a slightly different approach to Spotify, focusing on original, exclusive podcasts for its platform — Spotify has made similar moves but has been largely focused on strategic acquisitions of broadcasting tech. Apple is preparing to purchase individual podcast shows to make them exclusive to Apple’s platform, recently acquiring ‘The Zane Lowe Interview Series’, which has hosted interviews with people like Eminem, Lady Gaga, Justin Bieber, and Kanye West.
Apple has a different attitude toward monetization. Spotify has been focused on efficient and effective ad insertion as well as trying to convert free users to paid users, whereas Apple seems to be positioning itself so that users don’t have to listen to ads on its platform and it is encouraging listeners to indulge in Apple TV+ subscriptions, which is an ad-free and on-demand video subscription service. Apple’s combination of podcast hosting and its existing device ecosystem makes it a great investment for any investor interested in podcasting.
3. Google
Google (NASDAQ: GOOG) is leveraging its search engine, Google Assistant, and Google Home and Nest lineup to capitalize off of podcasts’ rise in popularity, whilst enabling a seamless user experience across connected devices.
Google wants its search engine and Google Assistant to work collaboratively to provide users with accurate, customized audio recommendations, resulting in the user listening to podcasts through Google rather than a third party — which equates to revenue for Google. Google has prioritized podcasts, so when you search for one on Google, you are given the host website and a list of episodes, with a play button to listen to the podcast through Google. Google is furthering this user experience by ensuring that if I listen to the MyWallSt Stock Club podcast, for example, on my phone, I can pick up from where I left off on my Google Home.
In a podcast-less world, Google could still be a great company and investment. Podcasts are not a huge priority of Google’s compared to Spotify and Apple, but the way Google intelligently looks at podcasts by leveraging its search engine and Google Home/Nest lineup give the company even more ways in which the company can grow.
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