Even with what Audioboom CEO Stuart Last says has been a “challenging year,” he is optimistic that the business continues to improve, and that fourth quarter will bring a turnaround that the company has been waiting for. Last told investors Monday that Audioboom is “drawing a line” as the fourth quarter begins, seeing changes not only in the ad market but also in how the company itself operates.
After seeing revenue decline so far this year, Audioboom expects to have at least $19 million of revenue during the fourth quarter which, if it proves accurate, would represent year-to-year growth of at least four percent and give the company its best revenue quarter since the second quarter of 2022.
“The ad market remains challenging,” Last said during an investor presentation. “We were seeing some pickup in the advertising space as we got through the spring, but demand weakened and July was a low point for revenue. Now we have since seen month on month revenue growth since July.”
The optimistic outlook for the fourth quarter comes after a soft summer ad market resulted in weaker earnings during the third quarter for Audioboom, which says July was the low point for the year. Total revenue for the first nine months of the year was $45.8 million, a 20% decline from a year ago. Not only does Last blame a weak ad market, but also the loss of the Morbid podcast, which exited Acast in May 2022.
One of the ways Audioboom is increasing its revenue is larger ad loads. Last said that while they generated an average of five ad impressions per download last year, today that number is seven.
That has given added heft as its average monthly downloads continue to climb. The company says it had record average monthly downloads in Q3 of 126.6 million, up 18% from last year. The result is the September e-CPM – or the revenue per 1,000 downloads – was $43.90, up from the Q3 average of $37.00.
Audioboom also had an average Q3 brand advertiser count of 7,960, up 40% from a year ago when the list included 5,699 brands. The direct-sold premium ads are making up a smaller share of Audioboom revenue. Through the first three quarters of this year 58% of its overall revenue came from direct sales, down from 71% last year. Its programmatic Showcase business is growing 30% year to year.
“We are ready to call July the bottom,” Last said. “We are seeing small improvements since then, but we are not seeing major improvements at this point in the advertising market. We are really operating now as if the current state of the market is the new normal.”
The soft ad market resulted in a $1.7 million loss for the first nine months, although Audioboom says it expects to return to profitability during the fourth quarter and into 2024 as the ad market improves and it renegotiates some minimum revenue guarantee deals with terms that are more favorable to the company – or split with some partners outright.
Audioboom announced earlier this year that it is focusing on scaling back on how much it is paying out in minimum guarantees, especially as its ad revenue has been weaker. That includes one especially money-losing contract on which it lost $1.5 million during the first half of the year and on which it expects to lose another $7.1 million when the three-year deal expires in July 2025. Last said that those agreements, signed “at the height of the bubble” during what he says was a “very buoyant” podcast industry, will “drop away” in the coming months.
“They will be renewed on more favorable terms to Audioboom, or they will churn completely out of the business,” Last said. He said in 2024 their minimum guarantees will drop by 75% and by January 2025 they will be on the hook for 90% less than what they are currently required to pay out to producers. Combined with a stronger ad economy, Last said it will help Audioboom get back to profitability.
The monthly update to investors also shows that Audioboom has been focused on trimming costs. It says it has cut 10% of total operating expenses during the first nine months of the year.
“We have been focused on improving the operations and processes within the confines of that new normal. And I think that this work means we can successfully move back to growth and profitability, even within this current ad market,” said Last. “If the ad market does show improvement and gets better in the next year, then we have even further upside.”
Last also said that Audioboom has not yet made decisions about beginning trading on a U.S. market, either in addition to, or instead of, on the London stock exchange.
‘“It is not a given that a U.S. listing would deliver more value right now,” said Last, who splits his time between New York and London. But he told investors that they continue to study the option, including the process and logistics that would be needed to trade on this side of the Atlantic.