This story originally appeared on Hot Pod Insider, The Verge’s newsletter on the biggest events in audio. You can sign up here.
It seems like 2022 was the year podcasting came back down to earth. After years of accelerated growth, podcast hits going mainstream, huge corporate investment, and hype about the coming market ($4 billion by 2024!!), optimism about the industry hit the wall of an uncertain economy. Mergers and acquisitions took a breather, advertising became stricter, and companies began laying off audio employees after years of frenzied hiring.
What does 2023 hold for us? If we’ve learned anything from the decade so far, it’s to expect the unexpected. But since I’m in as bad a position to predict the future as anyone, I spoke to a few experts about what they anticipate for the coming year. The bottom line: If the economy avoids major recessions, we’ll see more of the same for podcasts: slow but manageable growth. If there is a recession, then it could set the industry back.
The advertising market, to use industry terminology, is soft. It’s not horrible, there are still a lot of ad dollars flowing into various types of media, but it’s not growing as much as it used to. And there is a chance that it will get significantly worse in 2023.
This is going to sound very basic, and certainly many of you reading this already know how it works, but advertising is extremely susceptible to economic disruption. And there have been quite a few disruptions in 2022: the war in the Ukraine driving up energy costs; high inflation everything from vegetables to car insurance more expensive; and rising interest rates pushing down stock prices. Taken together, these factors make it more expensive to run a business. It could also force consumers to spend less on goods and services, and while that hasn’t really happened yetit is something that could easily if these economic conditions continue.
So companies that would otherwise be spending money on advertising are either feeling the pain or being conservative in the face of uncertainty. And when those companies have to choose between things like staffing, operations, customer experience, and marketing, marketing is often the first to go. That means fewer ad dollars flowing to the businesses that depend on them: traditional media, digital media, and social media.
“The uncertainty that people talked about as an abstraction for most of 2022 is really just getting started.”
Which is not to say that the ad market has collapsed, but it is shaky. Max Willens, a senior analyst at eMarketer, says he noticed something odd when he talked to an ad agency executive. The executive noted that only 5 percent of his client base had submitted their advertising budgets for the year. According to Willens, that’s very unusual so close to the end of the year. Normally, more than half of those companies would have already done so. “The uncertainty that people talked about as an abstraction for most of 2022 is really just getting started,” Willens said.
So what happens next in the ad market really depends on what happens in the rest of the economy. The job market is still tight (even if you don’t feel that way if you work in the media, but more on that later) and inflation is starting to slow down. But a Bloomberg poll of more than three dozen economists is more pessimistic. They put the probability of a recession in the next year at 7 out of 10.
Barring a total financial disaster, podcasting should be fine. Not great, not terrible, but okay. The problem is that the industry has been operating on the assumption that podcast growth would continue to be as strong as it has been for the past few years.
By 2023, eMarketer estimates that podcast ad revenue should still grow 28.8 percent, about the same growth rate as in 2022. But that’s also about half the growth rate podcasts experienced in 2021. Worse, that rate is expected to decline by more than 10 points in 2024. “People overestimated and misinterpreted the rebound in 2021 as a sign that it was going to be a stepping stone to sustained real growth,” Willens said. “And you see in the media that it’s been shown to be quite wrong.”
During the boom, companies like Spotify, Amazon, and SiriusXM invested hundreds of millions of dollars in podcast technology and content in the expectation that the industry would continue to grow. Even if investors aren’t happy with how much they spent (and their current podcast profit margins), they’re in a better place to capture what ad dollars are flowing into the market. With the biggest podcasts on the market (Spotify and Joe Rogan, Wondery and SmartLessSiriusXM and crime addict) and more sophisticated tech stacks, are in a better position to weather a downturn. Indie creators, who are already going through a tougher time than they were a few years ago, will have to pick up the leftovers.
Probably. While layoffs have been avoided in many sectors of the economy, that has not been the case in technology and media. As I mentioned earlier, companies will cut advertising budgets before cutting workers. But those ad cuts end up resulting in layoffs at ad-based businesses. (Lucky for us!)