Motley Fool Money - One Lifetime of Ads = $22,000

Episode Date: August 20, 2024

Stock prices are up, but consumers are squeezed. This puts advertisers in an unusual spot. Ricky Mulvey, Dylan Lewis, and Mary Long are live at Podcast Movement and they discuss: - The macro landscape for advertisers. - Podcasting’s shift to video. - The real value of your time to marketers. Companies discussed: TTD, PUBM, SPOT Note: No show tomorrow, we’re back on Thursday, August 22. Host: Ricky Mulvey Guests: Dylan Lewis, Mary Long Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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We're live at podcast movement, and you're listening to Motley Full Money. I'm Ricky Mulvey, joined live at the Residence Inn with Mary Long and Dylan Lewis. It's so good to see both of you in person. This is a rare opportunity. It's a rare opportunity. I think this is maybe the second or third time I've ever recorded a show in a hotel room. Yes. And I'm excited to be doing it again.

This is the pirate radio of podcasting. There are studios there. You don't need it. We got a table. We got Dan Boyd. We got mixing board. We don't need any of that. It's down to earth. It's authentic. We've only been at podcast movement for less than a day.

But how are you enjoying it so far? What are some things you've picked up? It's been fantastic so far. I think there's an energy to being around a bunch of people who do the same thing that you do and are as equally excited about it. I feel like, especially in the virtual world where we're doing a lot of our stuff from home, it's easy to lose sight of the fact that there's a lot of people who listen to the show and also who participate in make shows. So that's fun. I'm thriving on that. Yeah, one of the coolest things is you meet interesting people who are curious about niche topics. It can be hit or miss. This is a convention. There's a lot of entropy here, but that part has been a lot of fun.

Mary, how about you? People that are interested in niche topics, but also, again, like Dylan said, people that are all interested in podcasting and telling stories in an audio format and sharing that. And so even you can meet somebody who runs a podcast on the legal issues of podcasting, As Ricky and I met last night at one of the networking parties, and you can still have something to talk about, even though typically I'm not chatting with people about legal issues. We're going to talk about general trends in advertising and media a little bit later, but it has been interesting for me to see the number of podcasts about podcasts. There's a lot of podcasting exists in a circle sometimes. We've seen a couple of the sessions.

Any key takeaways that you've picked up from those. Well, so far in the morning, we've seen Stephen Bartlett, Diary of a CEO. We saw Ira Glass, kind of the grandfather of podcasting. And that's a pretty good kickoff. I mean, that's about as good as it gets. Stephen Bartlett was interesting. I actually had been in a car on the way here in a lift, and his show was on. And then I showed up, and I was like, here we are, recognizing the voice, hearing again.

So that was kind of neat. Yeah, it's cool to see Ira Glass and walk by him and go. That's Ira Glass. That's the granddaddy of this thing. He's a real human. He is a real person. Mary, how about you? I thought listening to Stephen talk, he had a lot of really interesting things to say about details

and how much experimentation can go into an interview show, which on the surface might sound pretty simplistic or simple. You talk to somebody. You ask questions. They answer. And he's talking about, like, when I say detail, he's talking about measuring the parts per million of CO2 in a room to make sure that people aren't too drunk on the carbon. That is a crazy level of detail to go into when just chatting with someone.

And those are the types of things that he measures on a show. So okay, we're not necessarily going, we didn't do that today before recording in person at the residence in. But there's like little takeaways about how you can experiment and look at interesting details to try to make a show just slightly better. On that note, I mean, one of the things that I was amazed by was. He was talking through some of the interviews that he had done and some of the prep for it. And he talked about interviewing Daniel Eck, CEO of Spotify.

And he said when he was coming into the room, he had, I think, Swedish House Mafia playing because Daniel Eck loves Swedish House Mafia and he was just trying to prime the pump to have him excited for the conversation. I don't know. Maybe that's something we need to be thinking about doing. I think that's a good idea. One more on that is I like thinking about things in terms of being 1% better. I like that he brought that up. He talks about how it's easy to get trapped into like the next big innovation. And that's honestly what we're kind of looking for as investors. If you're looking at a rule breaking company, who's absolutely just disrupting something.

But realistically, if you're working somewhere, if you're working on a project, it's much better to be motivated by a 1% consistent win kind of thing. Can I tell you, speaking to niche interactions? I do have a story. We'll see if Dan cuts it. This is my favorite so far. So I was waiting in line. And you always ask, you know, what's?

your podcast, what's, you know, what are you doing? Guy tells me, he's like, oh, I'm looking for a co-host for a show I want to do about loneliness. And I'm like, oh, that's pretty on the nose. That's, you know, that's like something a lot of people deal with. That's pretty interesting. So you get a co-host and then you're going to talk to people about how they've like overcome loneliness and, you know, maybe get some actionable things.

The guy's like, no, it's just going to be about loneliness. So I really, I'm hoping he finds his partner. I hope this works out for him, but so far, I think that's been my favorite interaction. Dan thinks it's made up. You've got to find this podcast. Do you Dan wrong? Yeah. Let's get into some high-level stuff.

This is the businessy business part of the show. Because there's a lot of talk. I mean, there's podcast industry trends. There's higher level sort of media trends that become apparent here. I think Jeff Green, in the latest trade desk earnings call, sort of summed up the state of play pretty well with basically talking about a conversation he had with a chief marketing officer. describing this sort of advertising landscape is one with, quote, the illusion of growth, where it appears that companies are doing well.

Stock prices are up, but the average consumer feels more constrained than ever in terms of purchasing power. That has significant implications on how companies market product from a pricing to packaging to advertising. So, let's go then. We each have two takeaways from the audio industry, from the ad industry. We'll go, Dylan, Mary, and then me. Dillon, kick us off. What is a takeaway that you've seen?

I think on that note of Jeff Green, kind of talking about the ad industry, something, I know we're supposed to be very excited about the podcast industry here. I will caution. I think the podcast ad industry is probably one to watch for a general slowdown in ad spending and consumer activity in general. And it's not because I don't love it, but it's because in the grand scheme of where spend goes. Podcasting, I think, still is probably towards the bottom of a lot of marketers' lists. It's true when you look at overall digital spend in a lot of the spaces that money tends to go. I think podcasts spend about $2 billion for 2024. For context, I think video spend, digital video spent, about $60 billion. And so I think if we see any

sensitivity with podcast spend, if you start listening to episodes and you start catching gaps in those episodes where there would be a normal ad firing, something like that, It's probably a sign that there's going to be a little bit of weakness in some other places, too. Yeah, they're looking for that really, not quick, but measurable return on investment. And for a lot of podcasts, advertisers, even though you're seeing sort of top of the funnel, just awareness marketing, which we've done a few of those ads on this show, the primary thing that marketers are looking for is for you to enter a code at a website so they can

directly track where you've come from. I wouldn't be surprised to see things slow down a little bit in that area, too. Mary, how about you? The thing that I keep seeing everywhere is video, video, video, video, video, video, video, and I feel like that's not really a surprise, but what's interesting to me is, like, from a creative standpoint, how you tell a story in an audio format versus a video format, those are different mediums. Like, they are best suited for different stories.

And so why at a convention that's geared towards audio storytellers do we see this push towards video? And if, like, if again, they are formats that are best suited towards different types of stories. And I, it's largely because video is a growth mechanism, right? Like, that's a way to grow a podcast. And so you can tell, you're telling the same story, but you're using something like YouTube to grow the show. And so, I don't know, I just think that that growth, whether you see audio become a springboard to like a video podcast becoming a totally different way to tell the original story, that'll be kind of interesting for me to watch her if it just continues to be, okay, no, it's just, the video version of our podcast is just. us sitting around on headsets talking.

Yeah. There's video options from Spotify coming, and that's something we were talking about earlier, Dylan, is sort of the YouTubeization of Spotify. Yeah, I think that's something to watch, and it will take a long time to happen, but we see a drumbeat here of encouraging creators to make video content. Stephen Barlett, in his conversation, was talking about how he doesn't view what he makes as a podcast. You use it as a show. And so if you think about it that way, you have these different avenues for where the show can go.

You have the audio expression of that. You have the video expression of that. You have clips that are going out there. I think more people are going to be thinking about it that way, because for one, if you're a creator, it diversifies you away from any one specific platform. But also, Spotify is pointing people there. They want people to be doing that. I would say one thing I've seen in this.

So I went to one, podcast movement in 2019, 2023, 2024. This gets into video a little bit, but there's generally been, I would just say, a hardening of the podcast industry. You used to see companies spending a lot of money on limited series where we'll find a sponsor, and then the ad dollars will come later based on the number of listeners that they're able to attract. I think that's largely over, and you've seen that at Spotify, too, with shows like heavyweight leaving. And also just fewer people, I would say, who are here trying to make podcasting a second job or a full-time job. Interest rates may have may have changed a few things here. Speaking of hardening of the industry, I was at an advertising

session on just, you know, what brands are looking for in shows. One of the things they did is they gave a number for basically a listener's time per hour listening to podcasts. So this includes content and the ads in the average hour of podcasting. And then I kind of took this to like the length of a human life, as one does. As one does, to just see. like, how do marketers value this thing? So, I got a number that I got to, but I'll pose it to Mary and Dylan. We'll say, so Dan was saying we start from 10. So age 10. So years zero through 10 don't count for an advertiser. We'll see. Sugary cereal, I don't know. So we'll do, we'll do 10 to 72. You wake up in the morning, you only listen to podcasts, and then you sleep eight hours

at night. 16 hours a day for 62 years. How much do you think that is worth? to the marketer, the marketer saying, but does it scale in a boardroom? I feel like I'm like back to being a child looking at a container of Eminem's at the library. I have to guess how many are in there. And I'm going to be wildly off base. $5 million? $5 million? Sure.

Oh, boy. I want to say first that that sounds like a terrible existence. As much as I love listening to podcasts, nonstop for 62 straight years. That's right. And I'm saying that out loud because I need to reason through this answer a little bit. 62 years. Mary's $5 million sounds pretty good. I'll go...

I'll go $3 million. $3 million. Dan, do you have a guess you want to do? I know I'm putting you on the spot. $2,900,000. Oh, you, jerk. Dan going for the price is right answer. $2,99,999,000.

$999,000. $999,000, 999,000. Cool. Cool, Dan. We're all off. $22,000. Wow. Can you tell that we work in the podcast industry?

Dan, where is that sound effect? It's big. Nice. Yeah. So that has made me a little bit mindful in terms of the time I spend watching ads where you realize this is how maybe marketers are valuing my time. I mean, I should say there is a sliding scale for podcasts. Like, I don't know if this is too inside baseball.

This show is for investors, so advertisers pay more to be here. But basically, they value your time. It's six cents per hour listening to a podcast, including content. It's eight cents for radio, eight cents also because there's way more ads listening to a radio show. Okay. Here's a question that we might cut. How much of that is because on a podcast, like platform, you can just skip over the ads? I can't really, I can do that on Instagram, but less likely to.

This is just average. This is just an average out from a media consultancy study. But that's why I'm thinking it's got to be so low, because it's so easy to pass by the ads. Maybe. Well, yeah, I guess my question on that, wanting to dig into it, is, how do you take that number and then reconcile it with an industry that has, you know, $30 to $50 CPMs for shows that have relatively affluent audiences? Like, advertisers must have some justification for that. I think so CPMs change also based on, I mean, you're in the strike zone for investing podcasts, but there's a lot of sports, true crime news podcasts where that goes down a little bit. And also the ad load for a podcast is significantly lower than something like radio.

So shows are less willing to put like a bunch of ads on the show because we've seen what happens to radio. Other big trend. One big trend. the Media Consultancy Group, Group M, expects total worldwide ad revenue spend to surpass $1 trillion in 2025. They're looking at a few things. One is digital growth. The second is growth in China.

More ads been there than anticipated. And the other trend that they're expecting is that by 2029, just five years away, connected TV ad revenue, stuff on Roku is going to overtake traditional TV revenue. Both of you, any reaction to that big trend? Any surprise there? I totally buy that. I absolutely buy that. I mean, I think what we see with digital advertising in general is it is a much more advertiser-friendly environment. You have tracking, you have much better targeting.

When we look at traditional media, it's big in the audience that it reaches, but it's an incredibly blunt tool. Yeah. Mary. Yeah, I got nothing to add. You got nothing to add. There we go. So I will go to one other trend before kicking it around. And one thing I am seeing more here. Can you guess what I'm seeing more here than that? I saw in 2019. One trend that advertisers are so happy to talk about

in podcasts. They're going to help you with it. It's a thing they're going to help you with. I'm doing a lot of quizzes. Is it AI? It's AI. And I think AI's in an interesting spot for advertising for a couple of reasons. One is I'm interesting to see, and this is outside of podcasting, just display ad growth. So the banners on

websites and how that's going to be hit by Google just summarizing stuff when you search. And one place that we might be seeing that is Pubmatic. They sell a lot of display ads, and for them, that display ad growth slowed to 2% year over year. They would point to a craziness with a buyer canceling in order issues with Yahoo and a change to their sales platform. But I do wonder if a lot of these display ads are going to continue to face, and I'm using quotation marks, headwinds, is more people just get information straight from search without visiting a single website. I think that's entirely possible. And I think that's kind of one of the big existential risks for a company like Google when

it comes to just the way that people are accessing information on the internet, right? Yeah. And the other thing we're going to start seeing that I'm hearing whisper, that I heard a experimentation with, because brands are uncomfortable right now, but I think there's going to be more AI sort of like host-red advertisements. So they know, Dylan, that you live. live in near Washington, D.C. They know, but Ricky doesn't know.

I know. Well, I was like, I don't want to give too much private Dylan information away. Dylan lives in Washington. I'm playing home game here in Washington, C. Yeah, they know what colors you like. They know maybe your physical activity. They know what teams you're interested in. So your favorite podcast hosts could appeal to you with your name, with customizable information,

in order to sell you shoes or meal kits. I don't know whether that concerns me more as a consumer or as a podcast host. Yeah. Because I don't really like the idea of being a part of ultra-targeted AI marketing. That's coming, though. It's going to be like Cloud Atlas from David Mitchell, where they're just showing you things that are exactly what you want that hit those stimulation buttons better than they're able to do with mass targeting.

Mary's shaking her head. Well, I loved the Cloud Atlas, David Mitchell reference, but I was not expecting that. I'm going to kick it to Mary. Any other big trends you're noticing in advertising or from the conference we're out? the conference, I think another thing is just like the effect of the influencer and how that plays into podcasting. There are obviously exceptions to this, but it seems like there are two large buckets. Again, there are exceptions, but it seems like there are two large buckets of people who start a podcast. And one is you're an existing brand and you want to use your brand to start a podcast to like pursue your own interests.

Or you are just a person that wants to build a brand by pursuing by like carving out a podcast. niche within your interest. Okay. And if you are a person who wants to build your brand, but you're just a regular person who wants to build your brand by building a podcast that caters to people that share interests is similar to you, that's a really crowded market, even if you're playing to a niche interest because you're, people only have so much time to listen. And how do listeners find that podcast, like in a crowded market?

I think that that's a hard question to answer. And so how you kind of see that play out will be interesting to me. Yeah, I think there's also hobbyists in there where people are just like this seems fun to do. I mean, it's basically everyone can have their own public access show. And this one, Dan, is not a bit. This happened last year. And it was in Denver. And I promise it's a real story.

I was talking to a podcast host. And, you know, the first question, of course, what's your podcast? What's it about? It's an interview show. And she told me that her podcast was a great way to sort of like find a question. closure in a relationship because she had her ex-boyfriend on the podcast and then did an interview for two hours. Dylan Lewis, reactions to that. Do you think we should start implementing that at the fool? I'd prefer we didn't. Okay. That's, I mean, you need to have a thick

skin to do a show like that. You know, bless them. That's wonderful. How about a trend? How about something you're more comfortable being asked? Any other big trends as we're starting to wrap up the show today? Well, all right, you've done a lot of quizzing, so I'm going to ask you a question. Let's do it. What percentage of Americans have ever listened to a podcast? 35%. Mary? Way higher.

55. 67% according to Edison research and a session that I attended before you guys showed up. Which is why I was able to surprise you with that data point. And I think what I think is interesting about that is it's clearly higher than what we thought. That's not necessarily habit listening, right? That's ever listened. So there is still growth. There's still ceiling for this industry to rise to. But I think a lot of the reason that we look for things like video coming in is we need to kind of get outside of the core podcast distribution audience because there's actually a decent amount of saturation that's already happening.

Yeah, I think that's fair. And also a decent place to wrap it or a good place to wrap it. That was a really good data point, Dylan. And you did beat me on the quiz. I was off by a factor of two and I work in this thing. Mary Long, Dylan Lewis. Thanks for joining me in person live at the Residence Inn, Marriott, across the street from podcast movement. This was a lot of fun. Absolutely pleasure.

Happy to be here. As a heads up, since all of us are going to be at the convention for the rest of its day and tomorrow, we will not have an episode on Wednesday. We will be back on Thursday. Thanks for listening. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy yourself anything.

based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll be back on Thursday.