Marco Bertozzi, Spotify’s VP Head of Sales EMEA, led the discussions at the Future of Audio, where he started by laying out a clear mission for the future of audio in Spotify’s world. Being part of Mediatel’s Future of Audio event was not only a great opportunity to hear all about what’s happening in audio but also what has fuelled growth for big players like Spotify.
And with impressive results announced in Campaign yesterday, 29th October, it’s worth looking into the drivers of Spotify’s formula for success.
According to Bertozzi, leading their innovation was their podcasting revenue, which outperformed expectations with strong year-on-year growth. Still in its infancy, Spotify’s podcasts platform represents a tiny slice of the total ad-supported business at less than 10% of total ad revenues. However, although small in its financial significance, this development is changing behaviours at Spotify and harnessing new opportunity for personalisation, a story well told by Marco.
Spotify shows how “exponential” growth in podcast engagement, driving their relationship with their “tribe”, is really a story about relationships. Owning this relationship is key to their strategy for the next decade. And they have only just started.
Let’s consider the stats…
- Podcasts currently claim a 4% share of all digital audio listening, rising to 8% among 25-34-year olds. (Rajar’s MIDAS Q3 2019 report)
- Podcast hours streamed on Spotify grew 39% quarter on quarter, with podcast adoption reaching almost 14% of total monthly active users. (source: Campaign)
When developing its podcasting proposition, Spotify proposes investing in three distinct areas to ensure it remains a successful offering as the audio marketplace evolves:
Content is king
“We want to turn the primary focus of what we do onto originals,” Bertozzi said. Investing in podcasts means more than the aggregation of podcasts created by third parties, which Spotify introduced to its streaming service some time ago, but rather the creation of unique content.
Spotify’s podcast users almost doubled in the past six months, since the business expanded its podcast capabilities. Necessary skillsets for this renewed focus were bolstered by the recent acquisitions of two US-based companies: a podcast production company, Gimlet Media; and creation and monetisation platform, Anchor. According to its latest financial report, Spotify has 232 million global monthly active users, 129 million of which use the free, ad-supported model. The service made revenues of $165m from advertising during the second quarter, up 34% year on year.
Spotify is also focused on optimising discovery personalisation
Bertozzi described the platform’s expectation of fast revenue growth through the remainder of the year into 2020, pointing to “increased demand” for podcast advertising following these acquisitions.
“Consumers, especially of younger generations, are increasingly looking to discover and curate their own audio experiences,” he said. “If you can own discovery then I think you can own the marketplace when it comes to what people listen to and how they listen.”
Investing in podcast content and how it’s a “real opportunity” for the audio streaming service was top of the development agenda in making sure the service remains relevant and ahead in this marketplace.
Securing ubiquity of the service is core to this strategy, so that consumers can listen on any platform, wherever they are – whether that is through smart speakers, mobile devices or in-car. Learning valuable information such as what content listeners are consuming, what device they’re listening on and where, means having ongoing conversations with its users throughout the day. This is building a data-rich mine of highly personalised data and represents a fundamental building block in Spotify’s future development.
Consider how access is opening a whole new world of audio opportunity for platforms and advertisers alike
Equipped with methods for streaming such as CarPlay tech, companies like Spotify will measure journeys from home device to car and beyond, to command a strong position in the future, based on a rich seam of deterministic data concerning listening topic preferences, locations, device IDs and more.
Audio remains under-utilised by brands when compared to the visual marketplace, many brands must get guidelines for audio in place, and many are “playing around with it” rather than using it as a serious advertising medium. Bertozzi hopes that heavily investing in all audio will help to close that gap, allowing creatives and advertisers to think differently about the proposition the streaming service offers.
Capitalising on the ‘moments’ offered in these connections; Spotify is ahead of the game with a growing offer for anyone looking to harness audio opportunity as part of their brand.
“We just want to revolutionise how advertisers work with this medium,” Bertozzi said. His message to advertisers is to be conscious that not all audio is radio; in fact, he talked of the canvas offered by a service like Spotify and how that can be used to drive messages home.
“Non-linear audio is a sector with a great deal of promise. While Bertozzi clearly had a specific agenda to impart, it is evident that Spotify is on the leading edge of the audio tech sector and investing heavily into its potential for sophisticated and nuanced targeting opportunities. I enjoyed the opportunity at MediaTel’s Future of Audio to hear from Spotify and a line up of fab speakers in this space.” Lesley Hickmott – Marketing & Communications Director.
At Space & Time we love hearing about the opportunities of this audio challenge and are working with brands to leverage the opportunities it presents. We have ongoing projects with clients to test, learn and refine approaches in this space.