How much money does your podcast bring in for every new listener that you get? How much money can you reasonably spend to get even more listeners? Do you know the answers to those questions?
Whether or not you’ve monetized your show, there’s a chance you don’t know the answers to those questions. In either case, you should learn the answers because they’ll give you the clarity that you need to know to grow your podcast audience in the fastest and most fruitful way.
If you want your podcast to be a thriving business, you need to start thinking like a business owner, and we’ve recruited this week’s Grow The Show guest to help us adopt a business mindset.
Today, we are joined by world-famous travel blogger and podcaster Gary Arndt. He launched his daily podcast called Everything Everywhere towards the beginning of the 2020 pandemic. Today, the show has over one million downloads.
He’s not only going to walk you through how you can calculate your current or future annual listener value, but he’s also going to share which of his podcast growth strategies have been the most effective and which ones you can start using right away.
How to Calculate your Annual Podcast Listener Value
If You Monetize Via Ads:
The Formula:
Annual Listener Value (ALV) = CPM/1000 x Number of Ads Per Episode x Number of Episodes Per Year
What It All Means:
CPM stands for “Cost Per Mil.” Mil is Latin for 1000, so when you run CPM ads, you get paid your CPM rate for every 1000 downloads that an episode gets.
For example, let’s say your CPM is $25. This means that, for every download you get, you make 1/1000 of $25, which is 2.5 cents.
If you have 2 ads per episode, you double that to 5 cents per download.
If you publish your show weekly, then you are going to be releasing about 50 episodes per year per year.
So, if the numbers in this example were your numbers, the formula would be:
Number of Ads Per Episode (2) x Number of Episodes Per Year (50) x CPM (.025) = 2.5
In this case, your annual listener value is $2.50.
If you monetize via Patreon or Supercast:
The Formula:
ALV = % of Listeners That Become Patrons x The Average Amount Patrons Donate Monthly x 12
What It All Means:
Your percentage of listeners that become patrons can be calculated by dividing the number of patrons you have by your monthly listenership.
So, for example, if you have 20 patrons and 1000 listeners per month, your percentage of listeners that become patrons is 2%
For the sake of this explanation, let’s pretend that your average patron donation is $7.00
We use 12 here because patrons donate monthly, but we are trying to figure out your ANNUAL listener value
If these were your numbers, your formula would be:
% of Listeners Who Become Patrons (.02) x The Average Amount Patrons Donate Monthly ($7) x 12 = 1.68
In this case, your LV would be $1.68
If Your Podcast Drives Sales for Your Business
The Formula:
ALV= (% of podcast listeners that convert into sales x your annual sales revenue) / (annual listenership/ episodes per year)
What It All Means:
The percentage of podcast listeners who convert into sales multiplied by your annual sales revenue calculates exactly how much money your podcast alone generates for your company each year.
For example, if your business makes $1,000,000 in annual sales revenue, and 5% of that comes from podcast listeners, then your podcast generates $50,000 for you annually.
HOWEVER, we aren’t just calculating what listeners who make us money are worth, we are calculating how much any one listener, whether or not they converted into a sale, is worth.
Because of this, we have to account for how many of your yearly downloads are one person. If each listener downloads 50 episodes in a year, we have to divide 12,000 by 50.
This is why we divide by our annual listenership. For this example, we’ll say that you have 1,000 downloads per month or 12,000 downloads per year.
ALV= (% of Podcast Listeners Who Convert Into Sales (.05) x Your Annual Sales Revenue ($1,000,000) / (Annual Listenership (12,000)/ Episodes Per Year (50)).
In this case, your ALV would be $208.30.
If You Monetize Via More Than One Method:
The Formula:
Total ALV= Ad ALV + Patreon ALV + Sales ALV
What It All Means:
If you are monetizing via more than one of the above methods, calculate each LV separately. Then, all you have to do is add them together.
In Conclusion…
Don’t worry too much about getting the math exactly correct. Even if you only have a rough idea of your Annual Listener Value, you’ll be able to make better-informed decisions about how to continue growing your podcast business!