Payment of tens of thousand dollars to pod casters by Spotify

John John Newman is a type of company like Spotify that wants to get involved in podcasting. He has a niche interest—collecting sports playing cards—and is passionate and knowledgeable about the subject. When he was searching for a way to launch his own show, Sports Card Nation, Anchor stood out in 2018. The Podcast Creation Software, now owned by Spotify, makes it easier to record an episode and provides a novel feature for new podcasters: funding options for all.

What Newman did not predict, however, was that Anchor himself would be the main advertiser using Anchor’s sponsorship feature. Newman says that over two and a half years on the platform, there were only three sponsors through Anchor: Anchor, Pocket Casts, and a company called The Black Tux. One such company, Pocket Casts, did not even pay for its sponsorship, confirms the source close to the company—instead, Anchor covered its costs to promote the feature. Newman notes that all Pocket Casts and Black Tux sponsorships lasted less than a month and totalled little more than $50. Anchor, on the other hand, paid him about $2,500 to advertise his own service.

Nine podcasters tell The Verge the same story: the advertising function of Anchor appears to be severely lacking in sponsors, and they have earned little, if any, opportunities outside Anchor or Spotify themselves. Three people say they’ve won thousands of Anchor and Spotify alone. Three also say they’ve quit or are looking to leave the Anchor Channel because they’re not getting new sponsors.

Anchor’s app is designed to help everyone launch a podcast just by recording it on their mobile. It promised to help podcasters monetize these shows through a feature called Anchor Sponsorships, which was introduced in the US in November 2018 just months before Spotify purchased the company for $140 million. Functionality is similar to YouTube ads—advertisers are instantly matched to podcasts that suit their audience target, and hosts can then read ads to sponsors and make money.

This is a radical concept, particularly for smaller artists. Usually, marketers deal only for shows that attract tens of thousands of listeners. With Anchor’s strategy, advertisers may spread their ad views over a variety of programs, rather than relying on one or two in a single network. Hosts should still pass on a sponsorship offer, too, if they are not involved.

“We’re determined to level the playing field for podcast monetization by enabling new creators to get paid and new brand dollars to enter the market,” Anchor said when it announced the feature.

But now it seems like the big vision is not panning, and it may potentially cost Anchor money to keep going. Sponsorships are now more of a networking avenue for Spotify to encourage new creators to join its network and retain them there.

Most of the podcasters The Verge talked to Anchor’s sponsorships last year and got Anchor as their first sponsor. They got $15 for every 1,000 people they had met. These podcasters state that their Anchor sponsorships expired in the second half of 2020 and that they were not given a future renewal date or a new sponsor to replace it. Three hosts say they’ve just made around $50. Newman said his sponsorship had momentarily stopped about three months earlier, but he emailed the company, and Anchor shifted it back to another CPM or cost 1,000 listeners. It’s not plain why.

Newman claims he hasn’t had a sponsor other than Anchor for the last two years, even though his show has expanded and now attracts anywhere from 1,500 to 3,000 viewers every episode. He reports that Anchor has paid him about $2,500 for almost two and a half years on the site. He’s also running his Anchor promotion at a $17 CPM, along with other advertisements he’s got of his own outside of Anchor.

Blake Chastain, a podcaster who creates two programs, including one called the Exvangelical about “coming to the messed up subculture of evangelicalism,” claims that both of his shows lost their Anchor sponsorships last year. His spirituality podcast reliably hits 2,000 or more people each show, he says, when the other one is born. He claims he and five other podcaster mates haven’t been partnered by a sponsor in months since Anchor’s funding ended, and now they’re planning to move to Megaphone, a hosting platform newly purchased by Spotify.

Megaphone charges money to be used as a hosting provider, but in addition, it provides an advertiser marketplace that allows companies to inject their advertisements into shows that suit their audience target, close to Anchor’s offering. The hosts, though, don’t read the ads. The biggest obstacle to entry is that Megaphone only provides its services to show or network 20,000-plus listeners per episode, which is why Chastain will have to collaborate with other podcasters.

Two other podcasters mentioned receiving sponsorships, besides Anchor’s own, including one for a sleep podcast called Deep Sleep Sounds and one for Spotify itself. The podcaster who received Spotify sponsorship, Dalton Trigg, says that he and his co-host made $1,700 from Anchor and $900 from Spotify while on the platform for about a year and a half. Since then, they have left Anchor and joined the Blue Wire Podcast Network with their basketball show, Mavs Step Back, and use Simplecast for hosting.

The fact that Anchor seems to be banking on its own sponsorship feature does not bode well for Spotify, especially given the critical role Anchor plays in the company’s growth strategy. Anchor offers its software and hosting services free of charge, bringing new podcasters to the field. It also beefs up Spotify’s own show catalogue. The company told The Verge that Anchor launched 1 million new shows on its own in 2020 and is responsible for 70% of Spotify’s podcast catalogue. Spotify also signed Anchor’s creators to exclusive deals, and a spokesperson said last month that 100,000 creators had generated revenue through Anchor’s sponsorship product to date.

Even, the situation all of these podcasters portray implies that while Anchor draws creators, it does not make a lot of money by selling ads. In fact, it seems to be just spending it. Plus, the popularity of some of these podcasters in drawing outside marketers suggests that if they hit a certain demographic threshold, they are often able to leave Spotify behind.

We reached out to Spotify for details on which other advertisers are actually using Sponsorships, as well as how much money the organization has invested on these advertisements, but refused to comment on the record.

Spotify has, though, put us in touch with the podcast How Long Away, which was released in March 2020 and is delivered by Anchor with most of the advertising coming from Anchor Sponsorships. The hosts, Jason Stewart and Chris Black claim most of their ad markets Spotify, Anchor, and Anchor-made shows.

There were three other sponsors of the show who came from Anchor Sponsorships, including Manscaped, Solaray, and Roman. The three of them, they claim, ran for around a month each.

Citi analysts sent a note to clients last week to encourage them to sell their Spotify shares, in particular, because their podcasting activities have not yet resulted in a major increase in premium subscriptions or app downloads. Anchor has been a success story for the organization so far. Also, those podcasters, when asked, claim they don’t miss using the app and find that podcasting was approachable. Receiving money from Anchor didn’t matter, either, because it was like a cherry on top.

But did Spotify join the podcasting room to subsidize producers to create new series, or to help themselves make more money? Anchor’s sponsorship condition seems to be challenging the decision.