Amazon’s Purchase of Wondery Is a Big Bet on Podcast Advertising

The joke in the podcast industry is that the year ahead is always the year that on-demand audio will finally go mainstream. In some respects it’s already there: More than 100 million people in the U.S. listened to podcasts each month in 2020, while such popular programs as The Joe Rogan Experience and the New York TimesThe Daily have amassed large, loyal audiences, though podcasting is still dwarfed by over-the-air radio in terms of both overall audience and revenue.

Amazon.com Inc.’s Dec. 30 announcement that it was acquiring 4-year-old podcast network Wondery has industry insiders again saying the medium could turn a corner in the new year. The investment follows Sirius XM Holdings Inc., Spotify Technology SA, and a string of others spending hundreds of millions of dollars to buy podcasting companies.

Amazon’s Purchase of Wondery Is a Big Bet on Podcast Advertising

At the time of its deal with Amazon, Wondery remained one of the largest existing independent podcasting studios and networks. Bloomberg reported in November that Apple Inc., which has bought at least two other podcast companies, and Sony Music Entertainment had each held talks about acquiring it. Terms weren’t disclosed, but the Wall Street Journal reported that Amazon paid about $300 million. The company declined to comment. (Bloomberg LP, which owns Bloomberg Businessweek, has partnered with Wondery on the podcast The Shrink Next Door.)

Amazon is well-positioned to translate Wondery’s audience into advertising revenue, something the industry is still figuring out. “Podcasts have huge audiences, but they’re still the most undermonetized media around,” says Dave Zohrob, chief executive officer of Chartable, a podcast analytics firm.

Amazon’s Purchase of Wondery Is a Big Bet on Podcast Advertising

Although some podcasts earn money from subscriptions, a significant part of the business proposition is based on their potential to draw advertising dollars that go to traditional radio. Ad revenue for U.S. radio totaled $12 billion in 2020, but it’s on the decline; podcast advertising revenue, which reached $1.1 billion in 2020, will keep growing, according to market researcher EMarketer Inc. Wondery could fit well into Amazon’s $13 billion advertising business, which is gaining on industry leaders including Alphabet Inc.’s Google and Facebook Inc.

Founded by former TV executive Hernan Lopez, Wondery reaches a monthly audience of more than 8 million, according to Podtrac, an industry measurement firm. Listeners can hear such hit shows as Dirty John and Dr. Death free with advertising or subscribe for $5 a month to hear them without ads. Wondery will become part of Amazon Music, which is included in the company’s $120 annual Prime subscription. Amazon also tries to lure its 50 million Amazon Music listeners to a bigger content catalog for an additional $8 a month. Its audiobooks business, Audible, and its video game streaming service, Twitch, are already working on podcasting as well.

In a statement announcing the deal, Amazon said nothing would change for Wondery’s existing listeners, but the company could experiment with its new podcast network in various ways, such as turning shows into video programming for Prime Video or using Wondery programming to increase engagement for its smart speakers.

Amazon’s main advantage may be its ability to improve targeting on podcast ads, given its rich data on customers’ preferences and purchase histories. It has a platform that lets advertisers use algorithms to buy ad space on its e-commerce website, which it’s also using to sell more audio advertising on Amazon Music. Amazon could also provide performance metrics to convince advertisers they aren’t wasting their budgets on commercials nobody hears, a problem that’s made big brands skittish about podcasts.

“Amazon knows who you are and what you’ve been looking into,” says Chartable’s Zohrob. “They can really make the ads effective.”
 
Read next: How Facebook Plans to Turn WhatsApp Into a Moneymaking Business

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.