Pocket FM reaches $500 million ARR, adds $250 million in past year: CEO

Pocket FM has grown to around $500 million in annual recurring revenue (ARR), adding $250 million over the past year while remaining EBITDA-profitable, co-founder and CEO Rohan Nayak said in a LinkedIn post on Thursday, September 10.

Nayak said the company’s key growth strategy has been using short video trailers of its audio dramas as advertisements to drive app downloads.

“We run a 90 sec video trailer of an audio drama as an Ad and ask users to download the app if they're interested in the rest of the story,” Nayak said.

He said the company arrived at this strategy after spending more than $100 million on user acquisition. According to Nayak, increasing the click-through rate (CTR) of an advertisement from 2% to 2.25% can reduce customer acquisition cost (CAC) by around 30%.

Based on this insight, Pocket FM redesigned its user acquisition system around what Nayak described as an “AI-first 2.25% CTR ad manufacturing machine” that can be deployed across countries.

For each new market, the company takes its hit shows and uses large language models (LLMs) to identify the most intriguing moments before creating scripts combining the strongest parts of the stories. Nayak said the first 60 seconds of these videos need to include a hook every five seconds and end with a cliffhanger designed to drive downloads.

If a marketing video fails to meet Pocket FM’s benchmarks of 2.5% CTR and 55% three-second through-play, a creative director steps in to modify the hook or cliffhanger, he said.

Pocket FM makes 17,500 ads a month using AI

Nayak said AI allows Pocket FM to create around 1,000 ads per show and approximately 17,500 ads every month.

He said the company was able to increase its user acquisition budget by seven to eight times without materially increasing CAC. According to Nayak, it took the company eight months to develop the approach, after which its expansion into new markets accelerated.

Pocket FM’s US revenue reached $25 million in 19 months, while Germany reached $21 million in 11 months and France reached $10 million in three months, Nayak said.

Pocket Entertainment targets AI-generated entertainment

Nayak said Pocket Entertainment, which comprises Pocket FM and Pocket Saga, has become the “largest AI entertainment platform”.

The company is betting that it will be able to produce “Naruto-like series for $1000” in around three years.

Nayak compared the potential impact of AI on entertainment with the streaming industry's effect on media valuations, saying the streaming war resulted in a $300 billion reallocation of market capitalisation and that the AI entertainment market could lead to a reshuffling of more than $1 trillion.

He said Pocket Entertainment differs from AI creator platforms such as Runway and Midjourney because it operates on both the supply and demand sides of AI content.

The company has attracted more than 550,000 writers, who collectively produce an annualised 2.5 million hours of content, while its platforms have recorded more than 137 billion minutes streamed, according to Nayak.

He said the company has multiple growth curves accelerating simultaneously, including AI-driven ad creation, greater show production through writers and AI, localisation and the expansion from audio into video.

“Every aspect of our business is designed to improve another, and everything is aligned so that the number of blockbusters continues to rise,” Nayak said.

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