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Amazon’s Move Into Podcasts Was a Big Advertising Play All Along

With revenue in the growing segment expected to top $1 billion this year, the e-commerce giant wants a larger slice of the pie.

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Illustration: Carolyn Figel for Bloomberg Businessweek

Amazon.com Inc. announced earlier this summer that it had acquired distribution rights to SmartLess, a popular podcast hosted by actors Will Arnett, Jason Bateman, and Sean Hayes. The e-commerce giant will be spending more than $20 million a year so it can offer new episodes of the talk show on its music service exclusively—for just one week—before they’re released on other outlets. To most outsiders, it seemed as though Amazon had overpaid.

But the company didn’t make the deal for distribution rights. It was far more interested in the right to sell advertising slots during the show. Podcasting differs from most other media businesses, in which such platforms as YouTube or CBS sell the commercials. In podcasting, individual shows and networks sell their own ads. The platforms then distribute the shows with advertising already included—an attractive opportunity for a company trying to catch up with market leaders Facebook Inc. and Alphabet Inc.’s Google in lucrative online advertising.