Spotify acquired Megaphone to further analyze user data and deliver personalized advertising. Does this mean Spotify Podcast will soon become the dominant podcast platform? We are taking a closer look at that.
Spotify has consistently demonstrated a strong interest in the podcast business over the past few years. In 2019, the Swedish streaming giant already bought the podcast companies Gimlet Media and Anchor. With this acquisition, Spotify created a new opportunity for advertisers to engage in targeted podcast targeting.
Now the company is going one step further – and announces to take over the next company with Megaphone. This is reported among others by the US-American technology portal The Verge.
Megaphone is one of the largest advertising and publishing platforms for podcasts, which are used by the international daily newspaper Wall Street Journal and the US television station ESPN, among others.
Spotify Podcast: Streaming service pays $235 million
Spotify CEO Daniel Ek was already talking about “Audio First” in early 2019 – and his words were meant exactly the same. The streaming service has long since ceased to focus solely on music, but also on other listening formats – and it is precisely for this complete development that the company is investing a great deal of money.
The megaphone takeover cost Ek around 235 million US dollars. Advertisers will soon be able to scale the reach of their ads in Spotify’s originals and exclusive podcasts via the Megaphone Targeted Marketplace.
Spotify himself writes in a blog post: “Together, Spotify and Megaphone will provide podcast publishers with innovative tools to help them earn more from their work”.
This would include the ability to monetize their content, connecting loyal listeners with even greater demand from advertisers.
The two companies plan to achieve this by “making streaming ad insertion available for the first time to third-party podcast publishers,” it continues.
Spotify wants to drive podcast marketing
The Swedish streaming service therefore wants to analyze user data more intensively in order to promote podcast marketing.
Until now, podcasts have often included radio spots. Megaphone, on the other hand, will enable publishers to place personalized advertising, similar to YouTube.
Podcast advertising is already personalized and dynamic. This means that the commercials you hear during your favorite shows are not always the same, but are dynamically exchanged depending on the time of day and current situation.
Nevertheless, the personalization factor remains relatively limited because podcast hosters have little user data to better individualize the advertising.
But Spotify has exactly this data. This is not as detailed as with Google or Facebook. However, Spotify knows which device you use, how old you are, what gender you are, which shows you like to listen to and much more.
Spotify already uses this knowledge with its Streaming Ad Insertions (SAI), which the streaming service launched in January. These ads are inserted in real-time.
This means that SAI decides within seconds which spot best suits the respective user at that moment. Of course, Spotify’s deals with advertising partners also play a role. But basically, Spotify uses your data to serve you the right ads.
Until now, Spotify Podcast has only used this information for podcasts that Spotify has developed itself. With the Megaphone deal, Spotify can now extend this to external podcasts.
Spotify, with 320 million monthly users, would be a very exciting podcast hosting platform. To gain access to these listeners as well as to the personalized advertising service, the podcast operators would have to pay Spotify.
This would make Spotify important for advertisers who want to generate or purchase more reach in podcasts.
Spotify Podcast important source of revenue
And Pocasts is again a major source of revenue for Spotify, as the latest quarterly figures from 2020 show.
The advertising revenues in this area have grown in double digits together with the Ad Studio Channels and contribute to the quarterly growth according to Spotify. From these advertising revenues alone, Spotify generated 185 million Euro in the third quarter of 2020.
The figures also show that 22 percent of all monthly active Spotify users listen to podcasts. A total of over 1.9 million titles are already available on the platform. This makes Spotify the most popular platform for podcasts – and the service is expected to build on this.