Venture: Spotify Growing
Spotify and Megaphone
Everybody’s everyday listening software has just gotten a little bigger, tech streaming service Spotify has recently acquired podcast-tech firm Megaphone. This acquisition cost $235 million and will allow Spotify to expand its advertising business. This move is a significant purchase for Spotify as its main competitor is Apple Music, who they aim to displace in their shared market.
Megaphone was founded in 2016 and focuses on helping podcasters with production, advertising, and audience metrics. They have their own metric known as "Megaphone Targeted Marketplace." This metric measures when to insert ads when a podcast is downloaded and gives the advertisers a target group interested in the podcast and products. This substituting for buying advertisements slots on a specific podcast where it will only target a particular demographic and may not reach a wider audience. Podcasters have realized the necessity of embracing a wider audience by offering different advertisements and content. Typical ad slots attempt to target an audience of 60,000 for more than 5,500 shows that use the service.
Spotify delivered its podcast ad-technology, also known as "Streaming Ad Insertion." This program allows advertisers to have exact numbers of how many times a listener is engaged in the ad. Using this information, they can narrow down what ads they can tailor to specific people. This acquisition will also allow for significant brands currently working with Megaphone to partner with Spotify. These advertisements alone are worth around 1 billion dollars to run on the podcast; monetization for actual listens will change.
Streaming Ad Insertions
Before this acquisition, Spotify primarily based their ads on their podcasts' subject matter. For example, if a sports podcast were playing, they would advertise gambling or sports tickets, but a large portion of listeners would be forgotten about which infers that the company is losing revenue in the long run. Good ads also increase audience retention rates and listeners are eager to see what are the next products that are going to be listed by the podcasters. With Megaphone, Spotify's way of acquiring data can make real-time decisions about which ads a specific listener should hear based on their data. Based on the goals of the various ad deals, Spotify is currently running.
Over the past couple of years, there has been significant growth in the podcasting industry as many consumers enjoy stepping away from music and would rather be more informed or hear people talk. This on-demand talk radio is soothing for most listeners as they feel a sense of tranquility by stepping away into a different world when they can listen to something they can enjoy.
In the podcast, most ads are not seen as ads as many listeners enjoy the listed products, and the impressive numbers for podcast ads are higher than that of music ads. Many other companies have also directed their ads the same way that Spotify is doing. Bre Rossetti, executive vice president of the strategy of Havas Media Group, tested this new ad tech with Puma and concluded that there had been a misalignment between consumer time and ad dollars spent on a podcast. This type of advertising works because advertisers do not believe that consumers are listening, but because the proper targeting and measurement technology hasn't been there.
She goes on to say, "It's solving something that is desperately needed in podcasts, which is transparency when it comes to targeting and measurement. In some ways, we all expect this from podcasts because they are a digital medium, but to date, it just hasn't existed."
It is of note to see advertisers working with businesses and consumers to target ads to people interested in their products. With the acquisition just taking place, there will be a lot of growth that has yet to come. Spotify will be able to set the bar for other competitors to reach, but Spotify is the leader of the pack.