Spotify builds a $2 billion audio ads juggernaut through technology and targeting
Jan 30, 2024
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Spotify's VP of Product discusses the growth of their ads business and the global expansion of advertising offerings. They highlight the integration of technology in podcast advertising and future plans to enhance targeting capabilities and creative ad production using AI.
Spotify has experienced substantial growth in its advertising business, expanding globally and offering diverse advertising options including audio, video, and display ads.
Spotify utilizes technology to optimize ad relevance and reach, leveraging dynamic ad insertion and streaming ad insertion, while also using rich user data for audience targeting.
Deep dives
Spotify's Growing Ads Business and Global Expansion
Over the past few years, Spotify has experienced significant growth in its advertising business, with ad revenue increasing 2.4 times since 2019. The company has expanded its ads business globally, not just in North America, but also in Europe, APAC, India, and Latin America. Spotify's advertising offerings span across audio ads, video ads, and display ads, with substantial growth seen in video ads. Spotify aims to merge the success of audio advertising with the potential of video ads. The ad business has reached a scale of around $2 billion annually, making Spotify a major player in the podcast and music advertising market.
Monetizing Podcasts on Spotify
Spotify monetizes podcasts through two main models: dynamic ad insertion (DAI) and streaming ad insertion (SAI). DAI allows for monetization through streaming and downloads, while SAI is used for ads played directly on Spotify. Spotify offers hosting products that enable podcasters to monetize their content by opting into Spotify's demand. They also have a product called SPAN, which is a large-scale, high-reach advertising solution that spans across various podcasts. While some podcasts are licensed and sold on an individual show level, SPAN allows for broad audience targeting and monetization across podcasts. Host-read ads are also offered, providing a unique opportunity for hosts to engage their audience with personalized ad messages.
Targeting and Creative Options for Advertisers
Spotify offers various targeting options for advertisers, including genre-based targeting, first-party audiences, and partnerships for third-party audience targeting. Advertisers can optimize their ads based on their objectives, such as clicks, video views, or other outcomes. Spotify is also introducing a podcast streams objective, optimizing for new listeners. Creative options for self-serve advertisers include partnerships with services like Voice Bunny for audio script-to-audio file generation. Looking ahead, Spotify is exploring AI and text-to-speech solutions for creative generation, aiming to enhance the user experience with relevant and engaging ads.
Measurement, Optimization, and Future Innovations
Spotify's measurement capabilities are expanding, with the release of Spotify Ad Analytics providing comprehensive insights for advertisers. While optimization models are currently focused on upper and mid-funnel objectives, Spotify's goal is to develop more optimization options based on data from the measurement tools. The challenge lies in building a robust and ethical ad system that respects user data privacy regulations. Spotify sees its competitive advantage in providing an engaging user experience, particularly with its latency in delivering audio content. The company is also positioning itself as an attractive platform for advertisers targeting Gen Z and aims to continue scaling its advertising business through partnerships and innovations in performance products.
Per Sandell, VP of Product for Spotify, focuses on Spotify's advertising strategies and products. Sandell highlights Spotify's substantial growth in the ads business, particularly after 2019, emphasizing the global expansion and diversification of their advertising offerings, which include audio, video, and display ads. He also touches on the integration of technology in podcast advertising, leveraging dynamic ad insertion and streaming ad insertion to optimize ad relevance and reach. The discussion further delves into Spotify's approach to audience targeting, using a rich dataset derived from user interactions and preferences. Sandell provides an overview of Spotify's future roadmap, including plans to enhance targeting capabilities and creative ad production using AI, aiming to balance user experience with effective advertising.
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