Monetizing a Podcast Through Fan Subscriptions Versus Ad Revenue
Podcasts are fun to produce, but ultimately, monetizing your work helps make your podcast sustainable. There are many ways to monetize a podcast, but the 2 main ways are:
- Ad & Sponsorship Revenue
- Listener Subscriptions
In this article, we’ll compare these 2 different models, covering the following topics…
- Itemize the advantages and disadvantages of each model
- Show the math on which models works better
- Our recommendation on which model to use
Selling Ads & Sponsorships
Advantages
- Relatively easy to drop ads on your episodes
- Not hard to find sponsors for specific niches
- Audiences are pretty used to hearing ads on podcasts
Disadvantages
- Editorial integrity is a risk when promoting certain brands
- Audience demographics is sometimes required before securing sponsors (which involves work to get that data)
- Sponsors usually prefer larger audiences
- Need to show sponsors ROI, or risk losing sponsors
- Takes time to find and sell sponsors
- Hard to keep all your ad spots sold year-round
- Risk annoying fans with ads
- There is a heavy 30% revenue split if using an agency
Selling Listener Subscriptions
Advantages
- Avid fans always want more content and are willing to pay for it
- The recurring subscription revenue is often more predictable than ad revenue
- It’s a great way to engage more with your most avid fans
- Easy to implement with the podcast subscription platforms available
- Can monetize with small audiences, where sponsors often need at least 1000 downloads per episode.
Disadvantages
- You’ll need to create some premium episodes on a consistent basis
- It’ll take some work to promote your premium podcast to your current audience
- Only about 5% – 7% of your audience will actually subscribe.
The Math on Each Revenue Model
As we go through these examples, let’s use a hypothetical podcast that averages 5,000 downloads per episode and publishes new episodes weekly.
Selling Ads
For this podcast, let’s assume this podcast has 2 ad spots per episode per month: a pre-roll and a mid-roll. Let’s also assume they sell each ad spot at the industry average: $20 CPM. This means for every 1000 downloads, the podcaster gets $20.
So in our example, every month, this podcaster would earn $20 (industry CPM average) x 2 (ad spots per episode) x 5 (5k downloads per episode per month) x 4 (number of episodes per month) = $800 per month.
So assuming this podcaster is selling their own ads (vs using an agency), and they can keep their ad spots filled for the entire month with no missed bookings, then this podcaster can potentially earn $800 per month in ad revenue.
Selling Listener Subscriptions
In this scenario, let’s take the same hypothetical podcast and assume the podcast is selling a paid subscription for $5 per month. Let’s also assume that with the 5k unique downloads per month per episode, it represents 3000 unique listeners for this podcast. Let’s also assume that 6% of their total audience will actually convert into paid subscribers.
So in our example, a 6% conversion of 3000 total listeners would potentially equal 180 paid subscribers. 180 subscribers at $5 per month would be $900 per month selling a premium podcast subscription.
As you can see from the 2 scenarios above, the same podcaster can potentially earn about the same amount of revenue using either revenue model, selling ads or selling a premium podcast subscription.
Our Recommendation
So, which revenue model to we recommend?
Well, we hate to do this, but we recommend doing both. As the examples show, both revenue models can be quite significant, and you’d potentially be leaving money on the table ignoring either revenue model.
If we were to take a side though, for smaller podcasts, say less than 2000 downloads per month…we do recommend starting with a premium podcast subscription because you can start earning money with even an audience of 100 fans.
Earning any kind of money is extremely validating as a creator, and will push you to grow your audience and podcast.
Once you build your numbers, it’ll be much easier to attract potential sponsors and even podcast agencies to help sell ads on your behalf.
