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That, plus $40m+ in revenue on a growth trajectory, makes the case relatively clear. Plus, some of those options may not even be mutually exclusive. All those plans offer optionality to Spotify as they compete against large players in a competitive space. make Ringer exclusive on Spotify), ramp up the ad revenue, or even generate premium subscriptions or some sort of additional tier in their offering. If they have a devoted, engaged following through The Ringer, they have options to monetize - increase the moat around their business (i.e.

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They can think about how to monetize most effectively with their own streaming subscriptions later. I would venture to say the actual advertising revenue is less important than the fact that it exists as a revenue source. Ultimately, the advertising revenue is only one option at Spotify’s disposal. This greatly reduces the ' key-person' risk and makes the growth even more valuable to Spotify. Even if you assume he's on podcasts with 50m of the downloads, which to me seems like a high estimate, that still means he's been able to build a company that can generate 50m downloads without him. And from the outside looking in, it looks like the plan is working. Bill Simmons is trying to extend his personal brand to help other talented creators in The Ringer find and build their audience. Seeing the metric that matters - monthly downloads (and reducing his % of them) - you can see the plan. We can group all the podcasts without him as No BS podcasts.

He also shows up occasionally on many others, which we can group all together as BS on podcast. You have podcasts like The Ringer NBA Show and Binge Mode that have build pretty sizeable followings. He is a recurring guest on The Rewatchables, Ryen Russillo's podcast, The Mismatch, and The Challenge. And he seems to be running around to different Ringer podcasts like a man with his hair on fire. That being said, he also has The Book of Basketball podcast which he hosts. That means his own podcast is only 10% of the total Ringer Podcast Network downloads. So, let's say 10m downloads per month come directly from Bill's own podcast. Bill Simmons releases ~10 podcasts per month on his own stream, the BS Podcast, which estimates suggest have more than 1m downloads per episode. And if you believe the public data, it seems that there's a lot of evidence to suggest they are right. Overall justification: Spotify is betting that The Ringer can build a following that goes a lot deeper than Bill. Sure, he's had his share of misses ( Any Given Wednesday), but as any venture capitalist (or baseball player) will tell you, home runs justify a few strikeouts. Bill Simmons has a reputation for identifying promising talent ( Wesley Morris at NYT, Zack Lowe at ESPN), and coming up with creative ideas (30 for 30). He has an enormous personal following built through his writing as the Sports Guy, his early podcasting career, and his NYT-bestselling book The Book of Basketball. There’s two sub-reasons that contribute to an overall justification for Spotify. Part 2: Why pay 6x revenue on an unprofitable business? I would predict that pricing goes down, not up, as the podcasting metrics get more robust over time.

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Downloads do not equal plays (most subscription services auto-download if you've subscribed) and the call to action (use offer code X) is pretty obscure compared to clicking an ad on a website. The podcast ad metrics are much weaker than website ad metrics. Audio sounds appealing compared to traditional print, but I think advertisers are paying too much. Still aggressive, but now we're at least in the realm of finding a justification. $250m is almost precisely 6x that annual revenue. Simple math suggests that 100 million downloads can translate to $3.5m per month or $42m per year. What about podcasts? The Ringer says they have ~100m downloads per month. Together, $1.5m in annual revenue does not come close to justifying a $250m purchase price, no matter what the growth possibilities are. Let's call that another $1m per year to be generous.

But that doesn't include video, which is a very small subset of their web traffic but with a much higher CPM. Let's assume you can show each of those visitors 2 ads at $2 CPM (cost per thousand impressions - $2 is the industry standard for typical banner ads). Why do I say that? If you look at website traffic, The Ringer gets ~20m visits a month. Make no mistake - The Ringer may have started as a website, but Spotify bought The Ringer for its podcast network. Spotify is an audio streaming provider, or in my eyes, the Netflix of audio.

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