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Smart shuffle tries to sort your queue so that it is diverse (mixes episodes of different podcasts) and at the same time chronological within a single podcast. Assume you are subscribed to podcasts A, B and C. If your queue looks like AAA BBB CCC, smart shuffle will rotate between the podcasts. The result will be something like this: ABC ABC ABC. Developers sometimes call this method round-robin.
Now, assume your queue has a lot more episodes of one podcast than it has from the podcasts: AA BB CCCCC. Just rotating between them with the round-robin method will leave a bunch of epsiodes from the same podcast at the end of the queue: ABC ABC CCC. Smart shuffle instead tries to spread out the episodes of C evenly. The resulting order is then C ABC C ABC C.
In march, we had a poll on Twitter and users decided that they prefer the spred-out version over the basic round-robin version: