People walk by the New York Stock Exchange (NYSE) on the morning music streaming service Spotify begins trading shares on the NYSE on April 3, 2018 in New York City.
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Since 2019, Spotify has invested hundreds of millions of dollars in podcasts. Now it needs to show investors that the bet will pay off.
Spotify’s podcast library has been boosted by high profile deals such as the acquisitions of Gimlet Media, Anchor, Parcast and the Ringer. It also got the exclusive rights to Joe Rogan’s podcast, which is estimated to be worth $ 100 million alone, has a cult-like following and regularly tops the podcast charts. Since then, it has signed TikTok influencer Addison Rae, Kim Kardashian West, DC Comics, Michelle Obama, and The Duke and Duchess of Sussex.
Now it has to show that those investments were worth it. Analysts say Spotify’s new approach to advertising will help.
“Once the parts are in place to monetize podcasts in a scalable way, I think it will explode the dollars that come in podcasts. The medium is made for advertising only,” Stifel analyst John Egbert told CNBC.
According to an eMarketer forecast, podcast ad spend is projected to exceed $ 1 billion by 2021. And Spotify has new tools that allow advertisers to collect more from the people who listen to podcasts, allowing it to bring in a lot more ad revenue in the coming years.
Traditionally, it has been difficult to measure the return on investment in podcast advertising. Podcasters may know how many listeners have downloaded a show, but they don’t always know if someone listened or if they listened to ads.
Spotify’s “Streaming Ad Insertion” tool, which it introduced earlier this year, dynamically inserts audio ads into podcast streams on its platform, allowing for more targeting and metering. For example, advertisers can use the tool to see the age, gender, and device type of people who actually heard an ad. That information is valuable to advertisers, but the tool was initially only used for Spotify’s original and exclusive podcasts. Now it opens that to all podcast publishers with the recent $ 235 million acquisition of ad technology company Megaphone.
Megaphone provides technology for podcast publishers and advertisers looking for targeted slots on podcasts. The deal gives advertisers more scale when it comes to who they can reach and allows podcast publishers to monetize their shows. Many large companies are already using Megaphone to target podcast listeners. Customers include Google, Microsoft, Verizon, Walmart and AT&T, according to its website.
These types of investments in ad technology are expected to continue. “You’ll see them invest more in technology to make better money from podcasting and make money in different markets and make money from their ad-supported customers,” Jeffrey Wlodarczak of the Pivotal Research Group told CNBC over the next year. from Spotify.
As streaming ad insertion technology becomes more prominent and podcasts gain in popularity, some advertisers may feel more comfortable spending on many of the other third-party podcasts available through Spotify.
“I think the most important thing is for Spotify to monetize other third-party shows,” added Egbert. “It’s interesting if they make money from their own podcasts, but the real magic would help, using their truly unique scale, to bring more ad dollars to podcasts that have ever appeared on the medium before.”
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