The radio industry has long complained that the amount of advertising it receives is not on par with the massive amount of reach and time spent listening that consumers give it. That disconnect is continuing into the digital realm, where new research by WARC finds a sizable opportunity exists for retail and consumer packaged goods categories.
North American and European consumers spend 20% of their media time with digital audio yet retail brands allocate just 1.4% of their media investments on digital audio formats in the U.S. and CPG brands spend just 1.1% of their ad dollars with digital audio. The investment in Europe is considerably less, ranging from 0.8% to 0.2%.
“Consumer demand for digital audio is growing, but there is still a striking imbalance between share of investment and share of consumption,” says WARC. The just-released Sonic Boom study was conducted by WARC on behalf of Spotify. It surveyed over 350 CPG and retail marketers from the USA, Canada, UK, Germany, France, Italy and Spain. “Consumers’ appetite for digital audio is growing, yet the channel still commands a disproportionately small share of advertisers’ budgets,” the report says. “This imbalance poses an opportunity for marketers to cut through with engaged audiences.”
While the disparity between usage and spending exists, WARCs survey finds there is a growing realization among many brands that they should be spending some of their dollars with online audio. “As marketers seek to take advantage of the digital audio boom, investment on digital media is taking off,” the report finds. It says U.S. retailers increased their spending on podcasts by 52% last year as they also invested 38% more in streaming music services.
This year, WARC says growth in investment on digital audio in the U.S. is forecast to surpass Snapchat and compete with TikTok. That conclusion is based in part on the finding that nearly two-thirds (62%) of retail and CPG brands that advertised on streaming music services during the past year regard them as “core” to their media mix. And half of advertisers also said podcasts are an integral part of their ad mix.
Further helping give digital audio a tailwind is that a significant majority of retail and CPG marketers expect their budgets to grow this year. As a result, 63% say they plan to spend more on podcast advertising, while 55% will invest more on streaming music services.
Digital audio is seen as especially useful at the top of the so-called purchase funnel, such as with brand awareness. That will put podcasting and streaming music services in good standing this year, according to WARC. Its survey found that 2023 will see a renewed emphasis on driving brand awareness with 63% of CPG marketers expecting to put more dollars toward that goal while 43% of retailers said they will do the same.
“Marketers believe digital audio has a role to play across the path-to-purchase,” the report says. “Compared to other media, purchase intent was nominated as a particular strength.”
WARC also notes that those it surveyed displayed an “encouraging level of optimism” about the year as 69% expect their overall marketing budgets to go up while just six percent anticipate they will shrink.
“The challenge in determining the optimal media mix has intensified steadily in recent years for advertisers,” says Aditya Kishore, Director of Insights at WARC. Their survey finds that the typical retail and CPG brands spread their investment over 3.4 different media channels. While social media usage was nearly universal – it is used by 85% of respondents – the survey shows a third (34%) of brands said they use podcasts and 31% had invested in music streaming platforms. That compares to 60% for digital video and display and 44% for print.
“Fundamentally, the landscape has become very complex and multi-dimensional,” said Rene Lassauzet, Head of Brand at Nestlé. “A few years ago, it was more about just three or four touch points. Then the digital space exploded and offered possibilities for content creation and brand communication. These opportunities became even more complex as the generations changed. We now have Gen X, Millennials and Gen Z and brands must be able to connect with them.”
The changes are coming as more retail and CPG brands invest more heavily in digital media at the expense of traditional media, most notably, television.
“As consumers are ‘always on’ and the ways consumers engage with advertising from brands is in constant change, we found it essential to highlight digital audio’s place as a marketing lever within the media mix that brands can’t overlook,” said Spotify CPG Category Development Officer Justin Faiber.
Download a copy of the WARC Sonic Boom study HERE.