A profit warning from the social media company Snap this week has raised questions about the strength of the ad market. But speaking at an investor conference this week, iHeartMedia executives said that although some advertisers pull back during times of uncertainty, others actually ramp up their marketing – and audio is typically a winner in such situations.
The biggest growth driver at iHeartMedia is podcasting, which grew 79% in first quarter and now accounts for 10% of company revenue.
“I’ve never seen anything grow quite like this,” CEO Bob Pittman said, chalking up the trajectory to Americans’ love for companionship and a good story. As a medium that is consumed while doing other activities, Americans are filling up what used to be quiet time with audio, according to Pittman. “Now instead of whistling while I work, I listen to a podcast while I work. Instead of trying to jam my computer into the side and watch a movie while I'm cooking, I now listen to a podcast.”
While iHeart continues to bulk up with new shows, the vast majority of its growth in podcast downloads during the last year has been from existing shows. Unlike radio’s limited shelf space for new programming, there are no constraints on the number of podcasts that can be launched. It’s no secret that iHeart uses its 850 radio stations as a giant bullhorn to promote new podcasts but all the promotion in the world can’t turn a stiff into a hit. Pittman said it takes about two to three weeks of heavy promotion to determine whether they have a hit podcast on their hands.
While podcasting and digital in general are iHeart’s main growth propellants, the Multiplatform Group that houses its radio stations continues to generate the bulk of revenue and grew 15% in first quarter. Some of that is coming from advertisers who came into the company through another doorway.
“There is a natural inclination to buy the hot new shiny thing more than the old thing,” said Pittman. “But that doesn't mean that's where it winds up.” Some come in via podcasting or events and end up buying broadcast radio. “When you reach 90% of America, you can't begin to understand how important that is to get a message out,” Pittman said. “And as soon as people come in for something shiny, what they really want is our results. And the best way to get results is with a lot of exposure.”
A portfolio of 850 radio stations in 160 markets along with streaming, podcast, social and events assets gives iHeart a diverse revenue base to weather economic downturns, executives said at the J.P. Morgan Global Technology, Media and Communications Conference. In addition, no single category contributes more than 5% and no single advertiser more than 2% of its ad revenue.
“When you think about diversity, it goes to so many different categories, which is why we've been resilient during this period of time,” said CFO/COO Rich Bressler.
The iHeart assessment was reinforced by GroupM global President of Business Intelligence Brian Wieser who noted that it is not yet clear how economic uncertainty is impacting the ad market. Some companies may increase ad budgets while others may pull back.
Pittman concurred. “We find that during this period of uncertainty, that when something weird happens in the world, there is a reaction of freeze-up for a second, and then people go, ‘OK, the world didn't come to an end, let’s go,’” he said.