As of this month, 320 million people use Spotify every month. Spotify owns music and is now gobbling up podcasters and trying to own audio generally.
But at the same time startups are picking off playlists from Shopify and creating their own apps. Let's look at the history of internet audio.
Audio 1.0: Napster / Open Podcasting (Unbundled)
Internet Audio 1.0 was unbundled. Is was for one-off downloads through dumb pipes.
Open podcasts are delivered through RSS (Rich Site Summary), which is just an XML file that holds metadata and location of the audio files. The beauty of this system is that it's open. Listeners can use their favorite player and the publishers are free to publish without any authentication or gatekeepers standing between them and their audience.
The limitation of this model is that publishers are flying blind when it comes to analytics, monetization, and security.
Internet Audio 2.0: Spotify / Audible (Bundled)
Internet Audio 2.0 is the bundling of content. Spotify and Audible are trying to build audio empires by bundling all audio around.
In 2019, Spotify spent $500 million acquiring podcasting companies including Anchor, Gimlet Media, and Parcast.
In 2020, Spotify has spent close to a billion dollars on signing exclusive deals and buying podcast studios. This allows them build up their library of exclusive content.
This is just the beginning. We are seeing the Balkanization of the podcast ecosystem. Spotify, Audible/Amazon, and Apple are taking the same playbook of video streaming of making unique content in video and siloing out the open ecosystem. Audio creators are trading control and a large cut of revenue for a better user experience and improved discovery, analytics and measurement, and targeted advertising and monetization. But audio creators don't have to join these empires. They can arm themselves and build their own businesses.
Internet Audio 3.0: Return of Unbundling & the Dawn of Luxury Audio
Internet Audio 3.0 returns to the unbundling. Let a million audio businesses bloom.
Why share your hard-earned audience with Spotify or Audible when you can build your own audio empire? Paying 70% to Audible in the age of free distribution is insanity. The tools have been missing to deliver a top tier app experience across platforms without access to top tier tech talent, until now.
Why Now?
We are seeing an explosion in audio apps. Some attribute this to Apple's excellent AirPods, but I think of it more as a natural return to our roots.
Human speech has been around for at least 100,000 years. The written word has only been around 5,000. Audio is our natural form of communication.
Through a weird fluke of history and Apple dragging their feet monetizing human speech has been slow to progress. Consumers have grown accustomed to podcasts being free. This is changing and the amount of quality content is exploding.
Back in 2006, only 22 percent of the adult population in the United States was aware of podcasting. By 2020, this figure had risen to 75 percent. Podcasting is an increasingly popular pastime in the US, and there were an estimated 88 million podcast listeners in the country in 2019. Forecasts suggest that the number of podcast listeners will surpass 160 million in 2023 after increases of around 20 million each year.
The best way to monetize audio is to break out from the podcasting cage. This has created the rise of vertical audio apps.
Audio-First Businesses
Podcasting should be just a small segment in the future of luxury audio.
Calm and Headspace, guided audio meditation apps, are billion-dollar companies already. They are the frontrunners, but there are countless opportunities to build audio-first businesses.
Education is a massive market and audio courses are non-existent or stuck in the age of cassettes. Podcasts and audiobooks work alright as educational audio, but they aren’t designed for it. Advertising-based monetization rewards quantify over quality and podcasts are designed to take you from A-to-Z.
For audio-first business ideas, look at popular text-based businesses with passionate communities. They should all have an equal or greater audio-first business. Audio stories, audiobooks, wellness, ASMR, history, religion can all support massive businesses. Most substacks would be better as weekly audio updates or stories. Consumption and satisfaction would skyrocket. Want to unbundle Spotify? Look at playlists with a bunch of followers.
Startup Playbook
Build a full-stack experience. The ubiquitous podcast RSS feed that open podcasts are built on is severely limited. Startups need to be able to do more than just throw MP3s into the void. Startups want to control the whole experience so they can provide better content security, interactivity, and improved analytics, like tying user activity to individual accounts, than any 3rd party podcast platform can.
High-quality differentiated and deeper audio content vs. broad, free libraries of shallower content. in house and/or creator led
Consumption experience that enhances the audio with extra features like reminders, streaks, visualizations, videos, PDFs, worksheets, etc.
Subscription and a-la-carte monetization. No ads.
Audio Business-in-a-Box
Spotify is building an empire, Avocado is arming the rebels. Before Avocado, an audio company would look at building out its own dedicated e-commerce app, web app, iOS app, and Android app. This makes them far more of a tech company than a media company. It's a huge distraction.
Just like with e-commerce today, every store should be leveraging Shopify, not wasting their effort building a sub-par version. Avocado sets you up with a beautiful audio storefront and audio players on the web and mobile. Creators can focus on what they're good at, producing great content. With Avocado these media companies get the Spotify or Audible user experience for a flat Saas fee instead of a massive cut of every sale.
Creators can take control of their business:
- Build your dedicated audio store
- Own their distribution
- Charge what you want
Just as we are seeing niche substacks and podcasts printing money, we will start seeing niche professors and fan-fiction writers building audio empires on the back of Avocado's platform.
If you want to get started today, we are 100% free for a limited time.