Acquired Episode 16 Midroll + Stitcher (acquired by Scripps)

In episode 16 of Acquired, hosts Ben Gilbert and David Rosenthal, alongside their guests, delve into the podcasting industry's evolution and its monetization challenges. They discuss Pilot, a comprehensive accounting firm for startups, highlighting its growth from a fledgling startup to a billion-dollar company backed by prominent investors like Sequoia and Jeff Bezos. The episode also explores the fragmented nature of podcasting, where content creation, hosting, and advertising are disjointed, leading to inefficiencies in monetization. The acquisition of Midroll and Stitcher by E.W. Scripps Company is examined as a strategic move to consolidate these aspects and capture the untapped potential of the podcast advertising market, despite skepticism about the execution. The episode concludes with the hosts' reflections on the podcasting space and its future trajectory.

• Pilot provides accounting, tax, and bookkeeping services to startups and growth companies.
• Recognized as the largest startup-focused accounting firm in the US.
• Endorsed by Ben Gilbert and David Rosenthal for helping startups focus on core product and customer needs by outsourcing non-core functions like accounting.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs, and in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes Pilot's comprehensive service offering and its position as a leader in the startup accounting space.

• Pilot began as a startup and has grown into a billion-dollar company.
• Supported by notable investors like Sequoia, Index, Stripe, and Jeff Bezos.

"They were just a startup themselves, and now they're a billion dollar plus company backed by Sequoia, index, Stripe, and even Jeff Bezos himself."

The quote highlights Pilot's impressive growth trajectory and the high-profile nature of its investor base.

• Jeff Bezos's axiom suggests startups should focus on their unique value proposition and outsource other tasks.
• Accounting is a prime example of a necessary function that doesn't directly impact a company's product or customer experience.

"Startups should focus on what makes their beer taste better... and outsource everything else that you do as a company that doesn't fit that bill."

This quote explains the strategic reasoning behind outsourcing functions like accounting, as they are essential but don't enhance the core product or customer experience.

• Pilot offers a range of CFO services, including setting up and operating a company's financial stack.
• They have experience across various industries and company growth stages.

"Pilot both sets up and operates your company's entire financial stack...and they've been doing this now for years across thousands of startups in Silicon Valley and beyond."

The quote conveys Pilot's extensive experience and the breadth of financial services it provides to startups.

• Pilot works with a diverse range of companies, including OpenAI, Airtable, and Scale.
• Capable of supporting companies from startup to growth phase and beyond.

"These are now companies like OpenAI, airtable and scale, as well as e-commerce and other companies."

This quote showcases the variety of companies that utilize Pilot's services and implies their ability to scale with their clients.

• Pilot provides a special discount to listeners of the Acquired podcast.
• The offer includes a 20% discount for the first six months of service when using a specific link.

"If you use that link, you will get 20% off your first six months of service."

This quote details the promotional offer available to Acquired podcast listeners, incentivizing them to try Pilot's services.

• The Acquired podcast has a dedicated listener base, including on platforms like Zoom and Stitcher.
• The hosts acknowledge individual listeners and their contributions to the show.

"We'd like to thank our one listener that we see in our analytics on Zoom and the one listener on Stitcher who happens to be my wife."

This quote highlights the podcast's personalized approach to engaging with its audience and the importance of individual listeners.

• Hosts Ben Gilbert and David Rosenthal introduce the episode and their roles.
• The episode will discuss technology acquisitions, specifically the acquisition of Midroll and Stitcher by Scripps.

"Welcome back to episode 16 of Acquired, the podcast where we talk about technology acquisitions. I'm Ben Gilbert... I'm David Rosenthal and we are your hosts."

This quote serves as an introduction to the episode's topic and the hosts of the podcast.

• The Acquired podcast introduces a Community Showcase feature instead of traditional advertising.
• This initiative is a way to thank and promote the work of engaged community members and listeners.

"We wanted to do something called community showcase... We're not charging anything or making any money on this, but we really just wanted to do it as a thank you to our community and listeners."

This quote explains the concept of the Community Showcase and its purpose as a non-monetized way to support the podcast's community.

• Midroll, a bootstrapped startup, was acquired by Scripps for an estimated $50 million upfront and a $10 million earn-out.
• The acquisition was significant given Midroll's position in the podcast advertising industry.

"Scripps comes in and they buy the company... for $50 million upfront and another $10 million earn out."

This quote provides details on the financial terms of Scripps' acquisition of Midroll and underscores the value attributed to Midroll in the podcasting space.

• Podcast advertising is relatively small, with an estimated $35 million spent in the industry annually.
• Midroll plays a significant role in the industry, with some of its podcasters grossing over a million dollars a year.

"Advertisers are only expected to spend about 35 million on podcasts this year... A handful of their podcasters gross over a million dollars a year."

This quote offers insight into the size of the podcast advertising market and Midroll's impact within it.

• The podcasting industry is fragmented across content hosting, distribution, and advertising.
• Scripps' acquisition of Midroll and Stitcher is seen as a move to consolidate aspects of the industry.

"The podcasting industry is so fragmented relative to how many people? Millions. Hundreds of millions of people listen to podcasts."

This quote describes the disjointed nature of the podcasting industry despite its large listener base.

• Podcast advertising lacks the measurement capabilities found in other media platforms.
• Advertisers are unable to obtain detailed information about listener engagement with their ads.
• Podcast analytics are limited to downloads, listener geography, and client applications used.
• Promo codes are the primary method for advertisers to track the effectiveness of podcast ads.
• The lack of closed-loop attribution is a significant challenge in the podcast industry.

"We basically could tell them nothing about what happened with actually, is this a good time? Should we share what our numbers look like here?"

This quote highlights the lack of detailed listener analytics available to podcasters, which makes it difficult to provide advertisers with meaningful data about ad performance.

• Other media platforms like Medium, Facebook, and Twitter tightly couple content consumption, hosting, and advertising.
• This tight coupling allows for precise measurement and has made these platforms dominant in advertising.
• Podcasting currently lacks this level of integration and measurement.

"Yeah, and compare and contrast that to other technology enabled media platforms like medium for blogging or Facebook, which we've talked about a bunch, or Twitter or know all of those, the consumption of the content by users, the hosting of the content for content producers and the advertising platform are all very tightly coupled into one product."

The quote compares podcasting to other platforms where all elements of the media experience are integrated, highlighting the disjointed nature of podcasting's current state.

• Scripps' acquisition of Stitcher is seen as a strategic move to own the full stack of podcasting.
• Stitcher, a podcast client, was acquired for $4.5 million after a history of venture funding and previous acquisition by Deezer.
• The acquisition aims to couple Midroll's ad sales with a front-end client for better advertising capabilities.
• Stitcher faces the challenge of competing with the default iOS podcast client.
• There is skepticism about Stitcher's quality and the potential for improvement under new management.

"So a couple weeks ago, the other shoe drops and Scripps acquires a company called Stitcher."

This quote marks the significant event of Scripps acquiring Stitcher, which is central to their strategy of owning the podcast advertising value chain.

• The podcasting industry is experiencing growth and presents a significant opportunity for innovation in advertising and analytics.
• There are concerns about the "facebookization" of podcasting, which could lead to a loss of openness in the ecosystem.
• Some industry figures argue for the potential benefits of a more centralized and monetizable podcasting platform.
• The current high CPMs (cost per thousand impressions) in podcasting are attractive to advertisers and content creators.

"The loop doesn't get closed, so you get a little bit of the picture of some of the challenges with the industry."

This quote summarizes the challenges faced in podcast advertising, particularly the inability to close the loop on ad engagement and attribution.

• The analytics available to podcasters are limited to basic listener data such as download counts and IP-based geolocation.
• The lack of detailed listener engagement metrics is a barrier to effective advertising.
• Podcasters can only guess at the actual number of listeners who reach the point in the episode where ads are played.

"We could tell them I'm looking at our LinkedIn episode two episodes ago that we have about 6400 listeners, which is unique ips that have downloaded the URL."

This quote provides an example of the limited analytics available to podcasters, which only includes download counts and does not reflect actual listener engagement.

• Promo codes are the primary method for advertisers to track the effectiveness of podcast ads.
• There is a reliance on listeners using promo codes for advertisers to attribute sales to podcast channels.
• The failure of listeners to use promo codes results in unattributed sales and incomplete advertising data.

"And everybody, you hear those promo codes in a lot of podcasts that give you that nice 10% off. That is literally the only way that the advertiser has to attribute to that channel."

This quote explains the reliance on promo codes for advertising attribution in podcasting, highlighting the limitations of current tracking methods.

• There is a need for technological advancements to improve advertising and analytics in podcasting.
• The integration of a podcast player with significant market share could enable better measurement and ad impression tracking.
• The acquisition of technology companies by media conglomerates could lead to innovation in the podcasting space.

"One way to own any sort of advertising on the back end would be to be the hosting and to be the analytics, but you couldn't do the measurement unless you have the front end too."

This quote emphasizes the importance of owning both the hosting and front-end aspects of podcasting to enable effective advertising measurement.

• The podcast industry has had mixed reactions to acquisitions and changes in the ecosystem.
• Concerns about user experience, audio quality, and ad delivery have been raised.
• The industry is watching to see if new management can improve previously criticized platforms like Stitcher.

"Yeah, I'm just going to throw it. I don't know if it's a bias or if it's, well, whatever. I think Stitcher is garbage."

This quote reflects the negative perception of Stitcher's user experience, which is a concern for its future under new management.

• The podcasting industry is at a crossroads, with discussions about monetization and ecosystem control.
• High CPMs in podcasting indicate a valuable audience and potential for profitable advertising.
• There is speculation about the future direction of podcasting, including the possibility of a more centralized and monetizable platform.

"There's sort of secret meetings going on with Apple and some of the bigger publishers and existing podcasters to understand should we make this something where it's actually a monetizable platform and they own the ecosystem top to bottom."

This quote reveals the behind-the-scenes discussions about the future of podcasting monetization and platform control.

• Statsig is a tool designed for product teams to ship features faster, automate A/B testing, and monitor the impact of features on business metrics.
• The platform provides visualizations supported by a robust statistics engine, enabling real-time product observability.
• It connects new features to core business metrics, offering instant insight into their effectiveness.

"Statsig lets you make actual data-driven decisions about product changes, test them with different user groups around the world, and get statistically accurate reporting on the impact."

This quote outlines the core functionality of Statsig, emphasizing its role in facilitating data-driven decision-making through testing and accurate reporting.

• Statsig is used by notable companies such as Notion, Brex, OpenAI, Flipkart, Figma, Microsoft, and Cruise Automation, among others.
• The platform is particularly useful for rolling out and testing AI product features.
• Statsig integrates with data warehouses, allowing for flexibility with existing feature flagging systems.

"Customers include Notion, Brex, OpenAI, Flipkart, Figma, Microsoft and Cruise Automation."

This quote lists some of the diverse and high-profile customers of Statsig, indicating the platform's wide adoption across various industries.

• The discussion transitions to acquisition strategy, suggesting that the acquisition in question is product-based and aimed at integration into a suite of services.
• The conversation implies that exclusive content and a Netflix-like model could drive success in the podcasting industry.
• Midroll's acquisition of Stitcher and the launch of Howl (a premium service with original shows and ad-free archives) are cited as strategic moves towards this model.

"If they can daisy chain these things together correctly, there's a bunch of money to be made."

This quote reflects the potential financial benefits of strategically linking various components in the podcasting industry to create a cohesive and profitable ecosystem.

• The podcast industry is seen as ripe for innovation, with significant potential for new entrants to make an impact.
• The hosts discuss the challenges and opportunities of starting a podcast-related business, including the need for a comprehensive solution that addresses hosting, analytics, and client experience.
• The conversation touches on dynamic ad insertion and the importance of host-read ads for revenue generation.

"There's a company called Acas that's doing dynamic ad insertion."

This quote highlights the existence of dynamic ad insertion as a technology in the podcast industry and acknowledges companies that are pioneering this approach.

• Apple's dominant position in the podcasting industry is discussed, despite their apparent lack of investment in the medium.
• The hosts consider the possibility of Apple opening up podcast reporting to advertisers, which could significantly impact the market.

"Apple classically sells hardware and makes a profit on that hardware and then has software and services to differentiate that experience."

This quote explains Apple's traditional business model and suggests why podcasting may not have been a focus for the company, despite its potential.

• Soundcloud's focus on music rather than podcasting is noted, despite the platform having the capabilities to support podcasts.
• The discussion highlights the importance of a dedicated podcasting client and experience to succeed in the industry.

"Soundcloud is about music and that they're pushing people to music, not to podcasting."

This quote points out Soundcloud's strategic focus on music, which may leave a gap in the market for a podcast-centric platform.

• The hosts share insights into their process of market analysis and validation for potential business opportunities in podcasting.
• They emphasize the importance of both top-down and bottom-up approaches to assess market size, risks, and the potential to acquire customers cost-effectively.

"We do two things. We do kind of a top down and a bottom up."

This quote explains the dual approach taken by the hosts' firm when evaluating a market opportunity, combining macro and micro perspectives.

• The lack of consolidation in the podcasting industry is seen as a challenge, making it difficult for new companies to gain traction without significant investment and differentiation.
• The discussion reflects on the need for a comprehensive solution that contends with dominant industry players like Apple.

"You would have to have a lot of confidence there to make a big investment in this, that Apple wasn't going to flip some switch."

This quote encapsulates the perceived risk of investing in the podcasting industry due to the potential for sudden changes by dominant players like Apple.

• Google's ownership of Blogger was compared to Apple's market share with iTunes in podcasting.
• Blogger did not achieve the same level of dominance as iTunes has in podcasting.

Google owning blogger, having an unfair distribution, the distribution channel, owning the platform. But blogger never had the kind of market share that itunes does, that Apple does with podcasting.

This quote compares the market share and influence of Google's Blogger to Apple's iTunes, emphasizing that Blogger did not reach the same level of market control.

• The acquisitions of Midroll and Stitcher are to be graded separately.
• Midroll is seen as a better company but its $50 million price tag for its $1.5 to $2 million annual revenue is questioned.
• Stitcher's acquisition is viewed more favorably due to its built-in ad pipeline and potential integration with Midroll.

Midroll, while it is a better company, they're really taking a flyer on spending 50 million on that thing. Their revenues right now are, I think, like one and a half to 2 million a year.

This quote questions the financial rationale behind the Midroll acquisition, highlighting the discrepancy between the purchase price and Midroll's revenue.

• Midroll is recognized for its role in advertising for major podcasts.
• The company's growth potential is acknowledged, despite the high multiple paid for its acquisition.

On the other hand, though, in defense of Midroll, they are the advertising network for some of the biggest podcasts, which, as we were saying, was one of the keys to unlocking this.

This quote defends Midroll's acquisition by pointing out its significant role in podcast advertising, suggesting it could be key to future growth.

• Stitcher's acquisition is considered due to its existing ad pipeline.
• The acquisition is seen as a small business opportunity rather than a large ecosystem play.
• Stitcher had 8 million registered users, which could be valuable if active engagement is improved.

Stitcher, could they have bought anything else? If there's another podcast client out there, I guess Stitcher already has this ad pipeline built in that they wouldn't have to sort of do themselves.

This quote discusses the strategic reasons for acquiring Stitcher, highlighting its existing infrastructure as a positive factor.

• TAM is vital for the success of both Midroll and Stitcher.
• The need for an integrated platform to unlock TAM is emphasized.
• The acquisitions are seen as part of a strategy to dominate the podcast market.

The whole key to this is you have to unlock the Tam, the total addressable market, and you have to do that through an integrated platform.

This quote explains the significance of TAM and the necessity of an integrated platform to tap into the full market potential.

• Pocket Casts is mentioned as an alternative acquisition target.
• Its ownership and user base are discussed, but details are not fully known.

Pocketcast could have been a potential one, but stitcher, for all of its problems, and we don't know how engaged these users are, but they had 8 million registered users.

This quote considers Pocket Casts as an alternative to Stitcher, speculating on its potential based on user numbers.

• Twitch introduced a tipping feature called "cheering" using virtual currency "bits."
• This feature is expected to significantly increase Twitch's revenue.
• The community member James Kay brought this update to attention.

Twitch, going way back to one of our earlier episodes, we talked a lot in the episode about the massive volume of transactions that are going through the Twitch platform in tipping.

This quote discusses Twitch's new tipping feature and its implications for the platform's revenue.

• Facebook's Paper app is being shut down, but its spirit continues in instant articles.
• The app was highly praised and will be available until the end of July.

Facebook paper is being shut down, sadly, but the spirit lives on in instant articles within the main app.

This quote informs about the shutdown of Facebook's Paper app and its influence on the ongoing instant articles feature.

• The SEC filing revealed that five parties were interested in acquiring LinkedIn.
• Microsoft's initial bid was $160 per share, and the final acquisition price was $196 per share.
• Salesforce's involvement in the bidding war increased the final price.

The SEC filing for LinkedIn, detailing all of the ins and outs and blow by blow of the acquisition process came out.

This quote introduces the detailed SEC filing that provides insights into LinkedIn's acquisition process.

• Crusoe provides a clean compute cloud specifically for AI workloads.
• The company uses wasted, stranded, or clean energy for power.
• Crusoe's data centers are located at stranded energy sites, offering cost benefits.

Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads.

This quote describes Crusoe's business model and its focus on providing a clean compute cloud for AI, emphasizing its use of alternative energy sources.

• OKRs (Objectives and Key Results) is a management tool for setting and tracking goals.
• It is used at Google and was introduced by John Doerr.
• OKRs involve setting a small number of objectives with measurable key results.

The idea is that you set a small finite number of objectives for yourself in any period and an objective is a high level thing.

This quote explains the concept of OKRs and how they are used to set and achieve high-level objectives with specific key results.