Podcasting is still an emerging media that is on a steady climb toward the billion dollar market. Even more noteworthy, it’s poised to grab a bigger share of the overall audio pie. Magna Global projects podcasting will capture an 8% share of the audio market within the next five years—or twice its current take—as more brand advertisers embrace on-demand audio.

In a new report Magna, the media buying unit of global ad agency IPG, forecasts U.S. podcast advertising revenue will total $680 million this year, a 40% growth rate compared to 2018. And within the next five years Magna expects that number to top $1.2 billion. Today that means podcasting is just 4% of the total $16 billion audio advertising market and 20% of the $3 billion digital audio marketplace. But the report says the data suggests “massive room for growth.”

Michelle Bovee, Manager of Market Intelligence at Magna, said podcast’s advertising total will still be “fairly small in the grand scheme of things.” Yet the rise of podcasting will help ensure that the audio marketplace remains stable. “We expect that linear audio ad sales are going to be flat or decrease slowly over time while digital and podcasts continue to grow,” she said in an interview.

On a recent episode of the Magna-produced Floor 9 podcast, Magna Executive VP Vincent Létang said what’s attracting advertisers to podcasting is a highly engaged listener in an uncluttered environment. Plus skipping ads is difficult. “Another big driver is the demographics of podcast listeners are very attractive to brands,” he explained. “Those demographics are sometimes hard or expensive to find elsewhere.” He said the data shows podcast listeners tend to be younger, more affluent, and better educated than either radio or television consumers overall.

Much like new listeners, Bovee said that marketers are also tuning into the podcast option just like the rest of America. Among the most enticing aspects of podcast advertising is the potential to leverage the connection that hosts have with their listeners through live-read ads. “I think as larger brands have noticed this phenomenon, they have become more willing to invest in podcasts and try running different campaigns,” she said. “And now some of them are starting to see value in that and so they’re investing more money. And other brands are noticing and then you get a snowball effect happening over time.”

Magna’s research team doesn’t interact with the agency’s clients but as it was compiling its analysis, Bovee said they spoke with those who do and found it’s a mix of client teams pushing advertisers already interested in audio toward the format while in other cases a client is a podcast consumer and has come to the agency saying it’s where they wanted to put some of their media budget.

But according to Magna’s report those commitments are usually not all that significant in terms of dollars. “At this stage, podcast ad budgets are typically fairly small, with advertisers seeing the spend as more of an experiment than as an investment with provable returns,” it says.

One surprise for advertisers is the CPMs paid for podcast ads are typically higher than what’s paid for broadcast radio. That’s in part because growing demand has pushed rates higher while podcast audiences are still comparatively small. “Pricing is one of the issues that we’ve identified as one of the potential inhibitors in the market--and because the podcast industry is still fairly fragmented that means there isn’t consistency in pricing from podcast to podcast,” said Bovee. The report says some highly sought-after podcasts have CPMs in the $50-$70 range while others might be more in the $10-$20 range. “They all seem to be more expensive than linear radio,” she said.

Even so, with the potential to access hard-to-reach demos, high CPMs aren’t always a deal-breaker. “Brands are willing to pay the extra money and they’re willing to pay more to get that extra impact from having the host reading the ad,” said Bovee.

The other big challenge is one that’s well-known to most podcasters: measurement. Magna says even as most podcasters offer download and streaming figures as well as drop-off rates, it is still impossible to tell, in most cases, whether a show has been listened to once it has been downloaded. And Bovee says the lack of consistency between podcasts and platforms also limits industry growth.

“I think it needs to be figured out in order for the industry to really take off from an advertising perspective,” said Bovee. “As long as people can see some kind of ROI on their podcast advertising, they’re not going to completely cut the budgets. But to start seeing big increases in investments, something is going to have to be done to improve consumption metrics.”

The 30-page report says Magna anticipates more advertisers will enter the space and those advertisers who are already active will shift from experimental budgets to dedicated podcast budgets. It’s a trend that Magna points out has already played out with social media.

“Podcasting is still fairly small in terms of listeners and dollars,” said Bovee. “But there’s a lot of room for growth.”