How Many Listeners Do You Need to Monetize a Podcast in 2023Oct 28, 2023
The Reality of Podcast Monetization
While money is at the top of most podcaster's minds, understand that it's not about having a large listener base to start monetizing your podcast. Even in radio where we are able to reach thousands upon thousands of ears per day, we know there are smaller segments of listeners can provide opportunities for monetization.
That's why you're here today reading this blog. I'm here to debunk a common myth: you don't need a massive subscriber base to start generating revenue from your podcast. What you do need is a strategic approach to monetization.
How to Make Money from Podcast Sponsorship
When you're ready to start attracting sponsors, there are a few things you can do to make your podcast more attractive to potential sponsors. First, let's start with making sure that your podcast has a high-quality production value. This means having good audio quality, editing your episodes carefully, and creating engaging content. These elements will matter in the long run and you'll do yourself a huge favor when a brand approaches you.
Second, identify your target audience. Who are you trying to reach with your podcast? This isn't just an exercise in "knowing your audience." This is far more important when you need to provide information to a brand about your target audience and additional demographics that will need to be provided before signing a contract.
Once you know who your target audience is, you can start to think about the types of sponsors that would be a good fit for your show. Try to remember that not all sponsors will resonate with your program. In the rock radio world, we aren't looking to have Disney promote anything on our radio station if the radio station's format is geared for an audience that is more about NASCAR, beer and a harder lifestyle. Please keep this in mind when you're doing this research.
Finally, create a sponsorship proposal. This is a document that outlines your podcast's audience demographics, listenership numbers, and other relevant information that potential sponsors would want to know. Castos has a great post that talks all about building these types of proposals for sponsorships.
Sponsorship Strategies from Radio
In addition to the general factors that we discussed above, there are a number of specific sponsorship strategies that podcasters can learn from radio. For example, radio stations often negotiate sponsorship deals that include a mix of on-air advertising and other promotional activities, such as social media posts and event appearances. Podcasters can use this same approach to create sponsorship packages that are more attractive to potential sponsors.
For more information on sponsorship strategies from radio, please see this blog post: Sponsorship Strategies from Radio That Can Help Podcasters Who Want to Monetize Featuring Steve Moynihan.
The Sponsorship Model: Not All Sponsorships Are Created Equal
Smaller podcasts often focus on specialized topics, attracting a dedicated, niche audience. This can be super beneficial to small to medium podcasts because brands looking to target these specific demographics may find your podcast to be the perfect advertising platform. In return, your audience's loyalty and engagement can often be more valuable to the brand than the numbers.
Obviously the most common way to monetize is through a sponsorship, but it doesn't have to be wildly complicated to calculate what to charge for your sponsorship if you're approached by a brand. So let's dive into how the big dogs like Joe Rogan do it.
Understanding CPM in Sponsorships
The industry often employs a CPM (Cost Per Mille) model to calculate potential earnings based on your number of downloads. If you're new to the CPM model, understand that you're not looking to get "millions", rather, you're focused on the word "thousands". CPM really means Cost Per "Thousand". So let's dive into a formula the industry is using that helps most people come up with a number on what to charge for ad space in their podcast.
The CPM Formula
The formula for calculating your potential sponsorship earnings is:
CPM Download x Price Per Episode = Your Income
For example, if you have 3,000 downloads per episode-- or 3 CPM--and charge $20 per episode, the calculation would be:
3 CPM x $20 = $60 per episode
This formula can be adjusted based on the number of sponsors you have. For instance, with two sponsors let's imagine you got 12,000 downloads per episode:
12 CPM x $20 x 2 Sponsors = $480 per episode
Adjusting the CPM Model to Your Advantage
If you're not pulling in thousands of downloads per episode, don't despair. The CPM model is flexible. For smaller podcasts, consider adjusting the price you offer to sponsors. For instance, if you're averaging 500 downloads per episode, you might charge $5 per episode, effectively making your CPM rate $10.
An Alternative: The CPD Model for Smaller Podcasts
For podcasts with fewer downloads, consider switching to a Cost Per Download (CPD) model. This allows you to monetize each individual download, making it more suitable for smaller audiences.
CPD (Cost Per Download) x Price Per Episode = Your Income
If you're getting about 300 downloads per episode and decide to charge $0.10 per download, the calculation would be:
300 Downloads x $0.10 = $30 per episode
If you have more than one sponsor, the formula can be adjusted like this:
Downloads x Price Per Episode x Number of Sponsors = Your Income
For example, with two sponsors:
300 Downloads x $0.10 x 2 = $60 per episode
This CPD model allows smaller podcasts to better gauge their potential earnings and makes it easier to attract sponsors who might be more willing to invest in a smaller, more targeted audience.
Diversifying Income Streams: Beyond Sponsorships
In my audiobook, Podcasting Payouts, I dive super deep into the sponsorship model and share with you the pros and cons of this method that has been used for decades.
While listening the book, you may find that the sponsorship model doesn't fully align with your own approach to monetization. However, don't dismiss it entirely. There are aspects of this model that you can selectively adopt to tailor it to your needs.
Drawing from my years of experience in the radio industry, I can attest that sponsorship models are highly effective there. However, transitioning this model to podcasting comes with its own set of challenges. It's absolutely achievable, but be prepared to sharpen both your production and copywriting skills to make sponsorships work in the podcasting realm.
This is why I recommend podcasters start looking into other forms of income that can help them in their journey.
Let me share with you a few other methods of making money that I talk about in my audiobook.
Affiliate Marketing and Google Adsense
Securing a major sponsor for your podcast may seem exciting, but it comes with significant responsibilities. Additionally, it's important to remember that sponsorships can be short-lived if they don't yield successful campaigns on your podcast.
That's why diversifying your income streams is crucial. Options like affiliate marketing and Google Adsense can offer a more consistent revenue flow, especially when you successfully drive traffic to your website.
In my own experience, Google Adsense and affiliate marketing have been instrumental in funding new equipment for content creation. Both continue to be reliable pillars of my online business.
If I had to choose between the two, my personal preference would be affiliate marketing. It has allowed me to grow my business more quietly, reducing the time I need to spend online without sacrificing income.
When you first start out in affiliate marketing, there will be some work you will need to do in terms of setting everything up and knowing the rules behind the affiliate marketing and the requirements that you will need to follow before getting started. Again, I get more comprehensive in my audiobook.
Merchandising and Digital Products
Merchandising can be a ton of fun if you have an engaged audience--and if you know enough about Adobe Illustrator/Photoshop to be dangerous. But this doesn't mean that you have to always be creating a t-shirt or some type of wearable.
Digital products are probably one of my favorite ways to monetize any type of content creation because they can be something that is consumable on a laptop or phone. Whether it's a simple PDF guide or a comprehensive training course, digital products can be a significant revenue generator without having to spend all of the money on overhead through merchandising.
Exclusive Content: The Power of Bonus Material
Offering bonus content like extended interviews or early releases can also be a lucrative strategy. A lot of podcasters use this model and it has proven to be really effective for podcasts like Small Town Murder. It not only adds value for your listeners but also creates an additional income stream.
The Crucial Role of Audience Engagement
Remember, no matter which revenue streams you choose for your podcast, audience engagement is non-negotiable. Engagement metrics not only influence your sponsorship deals but also impact the performance of your digital products. This involves incorporating calls-to-action in your episodes, urging listeners to visit your website.
However, having a website isn't just about marking your online presence. It should serve as a platform for further engagement, offering opportunities for visitors to join an email list or download free resources. In essence, engagement is a key ingredient for driving meaningful metrics.
Cultivating a Podcast Community
A frequently underestimated element of podcast monetization is community building. By actively engaging with your audience via social media, newsletters, or live events, you can cultivate a devoted following. This loyalty can lead to higher conversion rates when you market products or services. Keep this in mind as you develop various aspects of your podcasting venture.
Leveraging Analytics for Strategic Monetization
Gaining insights into your audience's behavior and preferences is crucial for targeted monetization. Utilize analytics tools to collect data on listener demographics, most-listened-to episodes, and engagement levels. This information will enable you to fine-tune your monetization tactics.
Most podcast hosting services offer analytics features that allow you to gather this data. The challenge lies in creatively and effectively leveraging these metrics to your advantage.
Final Thoughts: The Long Game in Podcast Monetization
Remember, podcast monetization is a marathon, not a sprint. It takes time to build up multiple income streams and see a return on your investment. Here I am near the end of 2023 benefiting from the strategies I set in motion nearly 7 years ago and I find that I can help more podcasters with consulting calls while having something working for me on the back end to help supplement other areas of income that I can use to upgrade things like my home or unexpected emergencies.
With strategic planning and a little elbow grease, it's entirely possible to turn your podcast into a profitable venture.
Bonus Tips: Tax Considerations and Legalities
Preparing for Income Taxes
One thing I had wished when I started implementing monetization strategies for my podcast and content creation were tax considerations. It's something I have a handle on now because of my experience in radio. But it's even more dialed-in with online content creation.
When you start earning anything online, it's crucial to set aside a portion for taxes. I wish I had known this fact in the beginning. Granted I wasn't making millions of dollars--and for the record I'm still not a millionaire--but I recommend saving around 20% of your earnings to avoid any surprises during tax season.
My strongest recommendation is to consult a tax attorney to help you navigate the complexities of business-related deductions and tax obligations.