People walk through the New York Stock Exchange (NYSE) on the morning that the Spotify music streaming service begins trading shares on the NYSE on April 3, 2018 in New York City.
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Since 2019, Spotify has spent hundreds of millions of dollars investing in podcasts. Now it has to show investors that the bet will pay off.
Spotify’s podcast library has been bolstered by well-known offerings such as Gimlet Media, Anchor, Parcast and Ringer acquisitions. He also obtained the exclusive rights to the Joe Rogan podcast, with an estimated value of $ 100 million alone, which has a cult-like follow-up and ranks regularly at the top of podcast lists. He has since been influenced by TikTok Addison Rae, Kim Kardashian West, DC Comics, Michelle Obama and The Duke and Duchess of Sussex.
He must now prove that these investments have been worthwhile. Analysts say Spotify’s new advertising approach will help.
“Once the pieces are installed to monetize podcasts in a scalable way, I think it will only exploit the dollars that come to podcasts. The medium is only made for ads,” Stifel analyst John told CNBC Egbert.
According to an eMarketer forecast, advertising spending on podcasts is expected to exceed $ 1 billion in 2021. And Spotify has new tools that will help advertisers get more information from people who listen to podcasts, which could help to earn more advertising 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, for example, but they don’t always know when someone has listened or if they’ve heard ads.
Spotify’s “Insert Streaming Ads” tool, introduced earlier this year, dynamically inserts audio ads into your platform’s podcast streams, allowing for greater targeting and measurement. For example, advertisers can use the tool to see the age, gender, and device type of people who have actually heard an ad. This information is valuable to advertisers, but the tool was initially only used for original and exclusive Spotify podcasts. It now opens this to all podcast publishers with the recent $ 235 million acquisition of advertising technology company Megaphone.
Megaphone offers technology for podcast publishers and advertisers looking for specific podcast spaces. The deal will give advertisers more breadth of who they can reach and will allow podcast publishers to make money with their programs. Many large companies already use Megaphone to target podcast listeners. According to its website, customers include Google, Microsoft, Verizon, Walmart and AT&T.
Such investments in advertising technology are expected to continue. “You’ll see them invest more in technology to better monetize the podcast and monetize in a variety of markets and monetize their customers with ads,” Jeffrey Wlodarczak of Pivotal Research Group told CNBC next year on Spotify.
As streaming ad insertion technology becomes more important, and as podcasts continue to explode in popularity, some advertisers may feel more comfortable spending on many of the other third-party podcasts available on Spotify.
“I think what will be key is for Spotify to monetize other third-party programs,” Egbert added. “It’s interesting if they monetize their own podcasts, but the real magic would help, by using their truly unique scale, to bring in more advertising dollars to the podcast than they’ve ever gotten to the medium.”
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