IHeartMedia is buying a podcast startup in a scramble to keep up with Spotify and Google in the race for automated advertising

By Lauren Johnson

Music giant iHeartMedia wants a bigger piece of the $2.7 digital audio advertising pie.

IHeartMedia has entered into an agreement to acquire Voxnest, a podcast technology startup, to grow its programmatic audio advertising as a complement to the ads it sells through direct deals.

IHeartMedia declined to disclose the price of the acquisition of Voxnext, in which it previously owned a minority share.

IHeartMedia competes with Spotify and Pandora for ad dollars. Its biggest hits include 500 national podcast shows like "Stuff You Should Know," and "The Ron Burgundy Podcast" that collectively drive 250 million monthly downloads.

Conal Byrne, president of the iHeartMedia Podcast Network, said that the acquisition helps fill in the tech piece of its podcast strategy. It faces stiff competition here from the likes of Google, which recently added more streaming audio inventory to its programmatic advertising platform; and Spotify, which has launched ad-insertion and metric tools for podcasts, helping to boost its ad business 25% last year.

"We needed this tech piece to really blow this out and take the industry to the next level," Byrne said. "The industry needs a more sophisticated podcast marketplace."

Podcast ad buying is still a fragmented process for advertisers that want to reach a big audience, and Voxnest's pitch is that it makes it easier for buyers and sellers to transact, said Brian Kaminsky, president of revenue and data operations at iHeartMedia. In theory, iHeartMedia will be able to fill ad inventory not sold through its direct deals, which now accounts for as much as 90% of its ad sales.

"With the combination of our inventory, Voxnest's inventory, and this new programmatic approach, we will be able to service the ad-buying marketplace at scale with data and technology, which is a lot like the way they buy other digital media," he said. "It's been a little bit of a missing link in the way we monetize podcasts."

Voxnest will operate as a standalone company within iHeartMedia and keep its existing leadership, including CEO Francesco Baschieri. The firm will continue to work with other publishers, and Bryne said he sees an opportunity for iHeartMedia to plug Voxnest's technology into other publishers and take a cut of ad sales.

"In an industry where the sell-through rate is always short of 100%, this can drive that closer to 100% for every creator in the whole industry, starting with ourselves," he said. "Podcasting needs a more efficient, effective, faster way to monetize unsold inventory."

Signup Today: Connectivity and Tech Briefing by Business Insider Intelligence

Get the latest Google stock price here.