As an Advertising Medium, Podcasting is Now a Force to be Reckoned With

podcast microphone with computer playing podcast
Research from Edison Research and Triton Media found that about 57 million people listen to at least one podcast per month. Photo Credit: Sergey Galyokin

The internet has continuously introduced new forms of advertising for marketers to familiarize themselves with. Well, the attention of marketers everywhere is now being captured by yet another digital form: the podcast.

It’s not exactly a new form; podcasts have been around since the the internet began, and the popularity of the form began rising out of obscurity, thanks to the rise of iTunes, over a decade ago. However, podcasting has recently begun to really take off as a form of media, so much so that it’s now becoming a viable option for advertisers. 2016 polling research conducted by Edison Research and Triton estimates that around one in five Americans over twelve years of age listen to at least one podcast per month, compared with around one in ten back in 2008. That 2016 estimate means about 57 million people listen to at least one podcast per month. That may not be a number that rivals some of the largest mediums, but it is still growing rapidly.

The true rise of the podcast seems to be an effect of the rise of the smartphone and mobile internet usage. A study by Statcounter estimated 42% of internet usage in America in 2016 to be from a mobile or tablet device, rather than from a desktop. That rate was just barely above 0% in 2009, which is just two years after the release of the original iPhone. The 2016 rate is also more than double its 2013 rate of 20%. The takeaway here is that the way we use the internet is shifting towards mobile, and I believe podcasting has benefitted, and will continue to benefit from, that shift.

Podcasting, like radio, is a nice backdrop to mundane activities, such as driving, mowing the lawn, doing house chores, etc. You could argue our attention spans are waning with the rise of technology; but I would argue we just seek more mental stimulation. Podcasts, while generally longer in form, add mental stimulation to monotonous activities, and that’s where I believe the growth lies, and that wouldn’t be possible without the rise of mobile internet. It is bringing a wider audience to podcasts, but it is the audience itself and way the ads are delivered on podcasts that are really enticing to advertisers.

woman listening to podcast on mobile phone
Podcasting is often used as a background medium, and has benefitted greatly from the rise of smartphones.

Podcasts boast desirable audiences for advertisers. The same Edison-Triton research found the median income among podcast consumers to be $63,000, compared to the median income among the U.S. population the study cited of $53,000. But that’s just the beginning; podcasts tend to focus on highly niche topics, and those topics can be just about anything. With all the different specific topics being covered, companies are bound to find podcasts for which its advertisements are highly relevant to listeners.

The targeting of advertisements could be convincing enough on their own, but the real differences may be the advertisements themselves, and the way they are delivered. The delivery, in my opinion, is the most natural and least annoying type of any media I have consumed. Usually, the podcasters promote the products themselves, and some even get creative with the delivery.

Additionally, the advertisements on podcasts usually are effectively being delivered to a captive audience. You can skip past it, but most people tend not to, and a big reason for that is, similar to radio, podcast listeners are often doing another activity while listening. It could be while driving, exercising, walking, or just doing chores, but when doing that, listeners will generally just let the ad run through. This idea of a captive audience can be especially enticing with the rise of AdBlock threatening common forms of online advertising, such as banners, or Youtube ads.

There’s a common saying that advertiser’s know they are wasting 50% of their budgets, they just don’t know which half is the waste. The measurability of internet advertising is changing that philosophy already, and podcasting answers the bell there as well. At first glance, it may seem these types of ads are hard to measure, since they can’t be clicked on. However, many advertisers overcome this by announcing specific codes on the podcast offering deals for purchasing with the code. This effectively works as a type of conversion tracking for advertisers who use the tactic. This isn’t necessarily a new concept, as it’s also been employed on television ads, but the practice is much more ubiquitous in podcasting.

Podcasting likely isn’t done growing anytime soon, so the ad spend towards it will likely only increase in the future. These type of ads solve many of the issues of modern advertising, such as viewer avoidance of ads and tying ad spend to return on investment. With the way podcasting answers these issues, more and more companies will catch on and try to capitalize. The fast growth of this media is just another example of how the internet has forced marketers to adapt to changing forms of consumption.

The Fiduciary Rule is Necessary to Protect Consumers from Advisor Conflicts of Interest

Trump signing executive order
President Trump signing an executive order. Source

On February 3rd of this year, President Trump ordered the Department of Labor to delay and review the Fiduciary Rule. The regulation, enacted by President Obama last year, was set to go into effect on April 10, 2017, but now faces delay for six months. This delay is being widely interpreted as an attempt by the Trump administration to get rid of the regulation before it begins.

The Fiduciary Rule would force all financial professionals who work with retirement plans and provide retirement advice to act as fiduciaries. A fiduciary is someone who is bound legally to operate and advise solely in the client’s best interest. The logic of a financial advisor operating in his or her client’s best interest seems intuitive, but that is often not the case, which is why this rule needs to go into effect and stay in effect.

The main opponent of the Fiduciary Rule is the financial services industry, which argues, among other things, that it would take away options from consumers. In an interview with the Wall Street Journal, newly appointed White House Economic Director and Former President and CEO of Goldman Sachs, Gary Cohn, offered this argument against the rule.

“We think it is a bad rule. It is bad for consumers… This is like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”

This is a false equivalency if I have ever heard one. There are many different ways to invest in the market with varying levels of risk and reward, but retirement planning is the broccoli of investing. So how would you feel if your waiter put a steak on the menu, told you it was broccoli, and said it was a heart-healthy meal? Oh, and I almost forgot to mention: how would you feel if that waiter got a fee from the steak company for getting you to sign up for that 20 oz porterhouse?

See, here’s the thing: at it’s core, retirement planning should be about low-risk returns where you keep as much of that return as possible. Anything else is, quite frankly, a distraction. A financial advisor can easily offer you distractions by steering you away from index funds and similar investment strategies towards actively managed funds that charge higher fees and, more often than not, do not beat the market. Financial professionals often do this because firms will offer payment incentives for directing an investor towards the fund. The ethics of this system are shaky at best, and while not all unbound advisors act in this manner, it is clearly more than just a small part of the financial services industry, and that’s why consumers need protection in the form of government regulation.

As I mentioned earlier though, this is not the only major argument against the fiduciary rule. The financial services industry has also argued that the rule will raise costs for the average consumer as the cost of lost incentive fees will be passed onto the consumer in the form of more flat fees being charged for advice.

It’s true that the rule would lead to more fees for advice, but consumers will still more than likely save money if they get advice for their best interest and follow that advice. The fees of actively managed funds are often high enough to take away substantial amounts from an investor. Morningstar reported that in 2013 the average mutual fund charged 1.25% annually. That may seem low, but compare that to the Vanguard 500 Index Fund’s annual fee of 0.16%, and you see the difference. Compound interest over the typical length of a retirement investment and that’s a difference of thousands of dollars lost to fees. Fund managers know this too. In it’s report on 2015 expense ratios, Morningstar stated that investors are paying less for fund management and attributed it to lower reliance on actively managed funds.

“The trend is being driven more by investors seeking low-cost funds than it is by fund companies cutting fees. Fund investors are increasingly buying passive funds and investing in lower-cost actively managed funds,” said the Morningstar Report. Despite fund managers taking and benefiting from this strategy, it would seem the average investor has yet to benefit .

“However, much of the increased economies of scale are going to the fund industry rather than investors. Assets under management have risen faster than fees have fallen,” said the same report.

Actively managed funds have been a major part of the financial services industry for decades now, and incentive fees for bringing investors into a fund are a major part of what keeps new money coming in. Main street hasn’t quite picked up the general truth about these funds the same way industry insiders have, but the shortening of that gap will likely come in time. That fact places even more importance on advisors bringing consumers into mutual funds. Like I said, many advisors are free to participate in this practice but don’t. However, clearly many advisors do participate in this practice. As actively managed funds begin to lose consumer confidence, they’ll probably face even more pressure to participate.

I for one wouldn’t count on a Quixotic industry insider to come charging to our collective rescue anytime soon; that’s what government regulation is for, and the Fiduciary Rule is just the type of regulation needed to protect consumers in this case.

What Will the Nintendo Switch’s Impact be on the Company’s Financials and Overall Direction?

Nintendo Switch console and controller
The Nintendo Switch, Nintendo’s ninth-generation gaming console, is set to release on March 3, 2017. Image Credit: BagoGames

On January 12th, Nintendo unveiled the release details of its new gaming console, the Nintendo Switch. After the unveiling, its stock price fell 5.75% on the Tokyo trading market.  Most analysts don’t believe it differentiates itself enough from its main competitors, Microsoft and Sony. Its just another example of Nintendo’s troubling performance that has followed the meteoric rise of the Nintendo Wii.

The dip in stock price isn’t necessarily a sign of things to come but it definitely displays the monumental importance of this upcoming release, which will take place on March 3rd. Nintendo’s eighth-generation console , the Wii U has sold a measly 13 million units. For comparison, Sony’s eighth-gen console, the PS4 has sold 53.4 million units.

The Wii U’s performance is even worse when compared to its predecessor, the Wii, which sold 101 million units and the Wii’s portable counterpart, the Nintendo DS, which sold 154 million units. The Wii U’s portable counterpart, the Nintendo 3DS has sold a respectable 61 million units, but the poor performance by the Wii U has been a significant drag on revenue. Additionally, Nintendo’s highly anticipated smartphone game “Super Mario Run” fell far below revenue expectations, despite nearly 40 million downloads. Nintendo stock did briefly spike when Pokemon Go was in its prime, but investors then realized that Nintendo did not actually make the game.

Nintendo has been a heavy slide since the aging of the seventh-generation of gaming (Wii generation). If the Switch is not successful it could lead to heavy investor pressure for  the company to switch focus from original gaming hardware to smartphone/tablet gaming software. This could mean Nintendo would shift from being the innovative gaming system manufacturer it has been since the 1980’s, to becoming a company that leverages its gaming brands such as Super Mario to create smartphone games that resemble pricing structures like Candy Crush or Clash of Clans.

If the Switch does fail, pressure to make that change would be a reasonable investor reaction, but from a gamer perspective it would be a shame to see a company that has had such an effect on the gaming world fall to that point. So what should we expect to see happen to Nintendo stock going forward? Time has shown that it is often difficult to predict a gaming console’s performance ahead of time. But certain factors can help one predict.

What games are accompanying the console?

The next installment of the famed Zelda franchise, “The Legend of Zelda: Breath of the Wild,” will release alongside the Switch. The game is highly anticipated and will surely help drive up sales of the device at launch. The trailer below shows off the games graphics, innovative gameplay and an expansive, open world.

If you have a nerdy affinity for Nintendo games like I do, you likely understand the hype the trailer has created. It’s important for gaming systems to have games that pair with it at release so that gamers buy the console at its release and immediately begin playing. In this regard, Nintendo brings a great pairing to the table at its release. However, not many other notable games are coming at immediate release. It seems the hope for Nintendo is that the anticipation of “Breath of the Wild” will be enough to drive sales at release.

Other notable games are coming later in 2017 as well. “Mario Kart 8 Deluxe” is expected to release in late April. The Mario Kart franchise has sold over 100 million copies in its different installments since its introduction to the second-generation Super Nintendo in 1992. It’s been a cash cow franchise that tends to drive interest in Nintendo consoles, so its smart of Nintendo to release it soon after the system’s release. Additionally, “Super Mario Odyssey” is expected to arrive during the 2017 holidays. It builds off of elements from the popular “Super Mario Galaxy” and brings in elements of open world city play similar to the “Grand Theft Auto” franchise.

This just covers a few of the games to release for the Switch in 2017, but hopefully it displays the exciting graphics and gameplay of the switch combined with the anticipation of certain games coming with the system.

Excitement and anticipation have been thrown around a lot in this article, but it might be one of the most important aspects to the system’s success. The Nintendo Wii was highly anticipated for its active-gaming setup, and became one of only five consoles in video game history to eclipse the 100 million units-sold mark. The teasers of the Switch and its games throughout 2016 have generated buzz, far more buzz than the Wii U ever generated. And for whatever reasons, gamers seem to be excited about the Switch. I personally was considering buying either an Xbox One or Playstation 4 and cutting ties with Nintendo before the announcement of the Switch. It now has me thinking about returning to what is widely considered the first video game giant.

Sources:

http://www.businessinsider.com/nintendo-switch-will-sell-2-million-consoles-2016-10

http://www.polygon.com/nintendo-switch/2017/1/15/14280604/nintendo-switch-pre-order-gamestop-ebay-gray-market