Why Most Podcast Sponsors Are a Bad Idea

Speaker A00:00:00

Sponsors sound like a dream. Get paid to talk about products, make money for just having an audience.It seems simple and it seems obvious, but for most creators, it's the worst monetization strategy you could choose. And it's not because it's bad money. It's the wrong money at the wrong time.Build on a foundation you don't even control, and if you build your show around it, you cap your income before episode one. So today I want to show you the math that nobody shows you. And I want to show you what to build instead.Hello, and welcome to Content Creators Accountant. I'm Ralph Estep Jr. I've been a licensed accountant. Yes, for 30 years. Makes me feel old some days.I'm a business coach, and I am the content creator's accountant, and I've spent 30 years watching what actually makes money and what just looks like it makes money. And I help creators, just like you, turn content into real income. So let's talk about where that income really comes from.This is the store you've been sold, and I've heard it from when I started doing content creation. Every new creator a few episodes in asks, how do I get sponsors, Ralph? How do I get paid? And I get it. That's the model that everyone talks about.Big shows say, this episode is brought to you by, and you say, well, you know, I'm going to be a big show someday. I want to do that because it sounds like you made it. So sponsors become the finish line. They become the proof. They become the goal.But listen, sponsors are a strategy. They're a byproduct. They come from after you build something valuable, not the thing that builds it for you.And for most creators, they're never going to be a meaningful source of income at all. Yes, I said it. For most creators, sponsors are never going to make it work. But let me show you why that is.Let's talk about what sponsorship actually pays, because we got to get into some real math today. Real math, just heart to heart. You admit most podcast ads pay on what's called cpm.Now, that's a fancy term for cost per mil, but it's basically what they pay you per 1000 downloads. So you've got this bucket of downloads, and they pay you a certain amount. Now, the typical range is anywhere from 15 to $30 CPM, 1000 downloads.15 To 30 bucks. Not a lot of money. So think about it like this.If you got 1000 downloads and you've got an ad spot, it's going to pay you between $15 and $30 per spot. So if you've just got one ad spot in your show, you're going to make between 15 and $30 per show. Well, let's make this a little bit bigger.Let's say you get 5,000 downloads, then maybe you're at 75 to $150 per ad because you've got five times that CPM. At 10,000 downloads, you're at 150 to 300. And at 20,000 downloads, then you're maybe $300 to $600 per ad slot.A show might carry maybe three of these. Depends on the length of your show. You might have what we call pre roll, mid roll, maybe a post roll.Just a few slots and it sounds better as you grow. But that CPM number quietly hides four things. Let's talk about what it hides.Because if you get past the shock of having to have 20,000 downloads to actually make any real money, here's the things it doesn't talk about. There's something called a fill rate.You just make an assumption that if you have a pre roll, a mid roll and a post roll, those are always going to be sold. That's not true. In fact, statistics show that that most of time about 50% of those go unsold. There's also the platforms cut.People don't want to mention this. The ad network takes a piece right off the top and that can be 2030, depending upon the percentage you want to work with. So the platform gets a cut.And there's also a mid roll premium. But the mid roll premium only works if advertisers want to be in your niche. And don't forget about the content creators. Accountant piece of this.You've got taxes and labor and you're taxed on all of it. Plus you got hours producing and reading those spots. So think about the math here. That's $600 per episode.On paper it sounds great, sounds like a lot of revenue, but you only get a fraction of that after the cuts. A solid growing show can still land at just a couple thousand months from ads. Yes, that's real money, but it's not a living.So now I want to talk about the number. Nobody tells you most of the time when I'm working with content creators, they want to replace modest income.Let's say you're making about $5,000 a month.So you've been told, well, I'm going to go after sponsors because everybody's telling you, oh, I'm going to go replace this income with sponsors alone. Let's be generous. Let's say you do four episodes a month, and in each one of those you have two ad slots. And let's say you get that healthy $25 CPM.Run the math. To replace $5,000 in income, you need roughly 25,000 downloads per episode. That's every week.If you're doing a weekly show, that's 100,000 episodes a month. Now, that's before the fill rates. That's before the platform cuts. So realistically, that number is about 40,000 per week.That's 160,000 downloads per month. So let's do a reality check. Most podcasts never crack a thousand downloads per episode. If you crack 5000, listen to this.It puts you near the top of the entire medium. So chasing a full income from sponsors alone isn't a plan. It's like buying a lottery ticket.But it also demands you have a full time job just to buy it. Which is why we need to talk about the scale trap if you want to make sponsors work. And listen, I'm not saying that sponsors can't work.They can work in a particular situation. But sponsors require scale. They require a huge audience. They require consistent downloads and high volume every single week.Like we Talked about it, 40,000 downloads a week on a monthly show, on a weekly show that comes out four times a month to replace $5,000 worth of income. But if you don't have those numbers, if you don't have those downloads, if you don't have that high volume, the math doesn't work.So it forces you to chase growth instead of building revenue. And every single decision you make as a content creator is focused on more downloads. And if you look in the market, you see it all the time.Louder titles, trendier topics, people chasing the algorithm. And silently, you start to ask, you start to wonder about, how am I serving my people? And you're focused on solving to get more strangers.That's a treadmill. And that treadmill leads to the same three places every time.And I've seen it with so many creators, it leads to burnout, leads to frustration, and income that never quite arrives. Because in the end, who really controls your income? Sponsors don't just require scale. They also create dependence.If you're going to go get sponsors, think about this for a second. Your income is going to rely on their brands.It's going to rely on that ad network that's taken a cut, and you're going to be relying on someone else's marketing budget. Those things change all the time. Hey, when we go through a tough time in the economy. Budgets get cut. What's the first thing people cut?Marketing campaigns and whole categories pull spend when the economy tightens. Now, I've been watching this in general business for 30 years. Advertising is the first line slashed when things get tight. Think about it.You built your whole show on sponsors. Your top two advertisers vanished in one quarter. Your audience didn't change, the work didn't change. But your income fell off a cliff.And there was nothing you could do about it because you didn't control the income. They controlled it. And that's the dangerous place to build a business. Now I want to do a little creator audit on this show.I always want to talk about what different creators are doing. I've got two creators putting in the same effort with very different outcomes.Let's look at Podcast A. Podcast a is doing 20,000 downloads an episode. That's genuinely an impressive reach. 20,000 An episode is fantastic. They're monetized with ads and sponsorships on a monthly basis.They're making between two and $3,000 a month. Now let's look at podcast B. Podcast B's got 2,000 listeners per episode. That's 1/10 of that 20,000 episode audience.But Podcast B, they're monetizing with consulting and coaching and services. They're not doing the ads, they're not doing the sponsors. Guess what? Their revenue is $10,000 a month and up.They've got a smaller audience, but they've got greater control. They're not relying on that marketing budget and they've actually got higher income.If you think about spine, Podcast A, all they're doing is renting their audience. They're renting their audience to advertisers. And the advertisers are paying them out a few dollars per thousand ears.But Podcast B is serving their audience directly. They're capturing the full value of the relationship. They're solving problems. Yes, Podcast A owns the microphone, but Podcast B owns the revenue.And that's the whole game. So I want to talk now about 5 creator owned revenue streams.Because you're like, wait a minute, Ralph, if you're saying, I don't do sponsorships, what am I going to do? Because I've been told this belief that I've got to do sponsorships. I want to help you build revenue. You control revenue, you design.That grows with your strategy, not someone else's budget. Here's five real ones that you can use today. Number one thing is services. You do the work directly. That's consulting done for you.Work at is the absolute fastest path to real money. And it's paid for an outcome today. Here's the second thing, coaching. You guide people to do the work themselves.That's got a higher leverage than anything. You can do it by group or you can do it one on one. You also could offer digital products, things like courses and templates and those guides.Here's the best part of that. You build it once, you can sell it thousands of times. A lot of small creators don't think about memberships.Memberships is a great place for recurring revenue. It's a community that pays month after month just to stay close, to stay in your world. And then there's ecosystems. That's the combination of this.And this is where I see true growth and true monetary value. You put that free show on top, maybe you've got a paid offer in the middle and then you've got that paid relationship at the core.But notice this, each one gets stronger as trust grows, not just as the audience gets bigger. That's where real income lives. Now, I want to be fair. There are places when sponsors actually make sense.They aren't evil, you just have to earn them in the right order. Here's when they make sense.If you already have serious consistent scale, if you've got that 40,000, 50,000, 100,000 downloads per episode, then the CPM math actually works. If you're willing to get those ad buys, you also have to look at the brand. If the brand genuinely fits.If you've got a particular type of content that's direct, maybe you do host red ads that is more better than those programming pennies. Maybe you've got an affiliate relationship built on real trust and you'd be recommending these products anyway.That is a great thing, but it's all about the pattern. In every case, sponsors sit on top of something you already own. They got to be the topping, never the foundation.Remember what I talked about a couple weeks ago? My basic framework? Audience times, problem times offer. Sponsors aren't the business model. That's an add on, that's a bonus. It's a layer.Your foundation is the formula. We got to go back to basics. The audience, the specific people you're built to serve.The problem that I have with sponsorships and for advertisers is so many times the creator is chasing after numbers that they lose sight of who their audience is, who they're built to serve. And when you do that, then you lose sight of the second thing, that problem. That's the real painful thing they need solved.You're not solving problems anymore. You're chasing after downloads and you're trying to fit it into some basket of here's what I can get for sponsorships.And then you lose sight of the offer all together. The creator and solution that you sell them is gone. Remember, audience problem offer.If you can line those three up, you don't have to chase downloads to make money. If you just serve the right people better than anyone else, it's predictable creator owned income. Everything else is just volume.Now if you've been thinking, Ralph, I just need sponsors. You might just be building the wrong model and I'd like to talk to you.You can go to contentcreatorsaccountant.com/audit and we'll do what I call a content monetization audit. I'm going to show you better revenue opportunities, where real value is and how to build creator owned income you can control.Again, that's contentcreatorsaccountant.com/audit so here's today's action. Steps number one, rethink your goal. Stop asking how do I get sponsors? And start asking a better question, how do I actually get paid?Because if you ask a different question, you got a completely different business model. Here's step number two. Identify your audience's problem, yet very specific. What's keeping them up at night?What would they gladly pay you to fix that problem is your opportunity. It's not sponsors. Step three, build one creator owned offer. You don't need 10, just one.Whether that be coaching, consulting, a product, a service, something you can control and sell this very month. And if you want to Step four, use sponsor strategically.Once you've done all those other things, if you use all of these things, that additional income can work. But that's the layer on top. It's kind of like the birthday cake. It's got the icing on top, but it can't be the foundation. Again.Sponsors aren't bad, but for most creators they're not enough and they never were relying on them, they're always going to be limiting yourself. You're always going to be chasing scale. You're always going to be one budget a cut away from zero because you don't own the revenue.But if you build creator owned income, you build that audience, you build that problem and you build that offer. You stop renting your audience out by the thousands and you start building something that's actually yours.And if you want to build a podcast that actually pays you, again, go to contentcreatorsaccountant.com/audit and apply for a content monetization audit. And let's build a model you can control, because that's what I do every day.I'm Ralph Estep Jr. And I am the content creators accountant, and I'll see you on the next show.