Spotify to generate ads on podcast, regulatory gaze fixates

Spotify’s rising success drives it to explore new horizons with generating ads on podcast for higher revenues, as Britain’s watchdogs direct their attention towards Europe’s streaming platforms, Reuters reports.

“We are increasing our ads business marketing workforce by over 70 percent in Europe, Australia, and Canada … and that’s off a pretty sizable base,” Spotify’s head of advertising business, Lee Brown, said in a statement.

“We’re investing in our advertising business. As far as a long-term strategy, I think gone are the days of advertising being less than 10 percent of our overall revenue,” he added.

After establishing its status as one of the leading streaming platforms, Spotify is taking a turn towards establishing a name for itself in the advertisement sector to bolster its influence on the market.

In fact, Spotify has already initiated its plan to generate ads on its platform with its latest hire of “an ad industry executive with 25 years of international experience to lead international sales,” Brown revealed without disclosing the executive’s identity, according to Reuters. 

The company, which makes most of its income from paid subscriptions and by broadcasting both audio and visual ads to users without a premium subscription, witnessed the emergence of its ad business from ashes following the pandemic overtake of the world.

“An ad not only created revenue for the firm, but it also lowers costs, as it leads to fewer songs being played and, in turn, modestly lower royalties to be paid,” according to Morning Star analysts.

It seems that with the fast-paced growth Spotify is going with, experts believe that the streaming stage enjoyed by so many around the globe could potentially overtake Apple’s podcast listeners for the first time this year.

The company has managed to come head-to-head with the Big Tech giant earlier this year, with competition on the rise as both companies launched paid subscriptions platforms, strictly focusing on podcasters.

With a podcast storm spreading on all streaming services, Spotify has showcased its strength by carrying 2.9 million podcasts in its second quarter (Q2), marking an estimated 12 percent rise compared to its previous quarter. This climb helped augment the company’s ad revenue since podcasts attract a higher subscription rate, as their lengthier period generates more ads.

In parallel, as a part of its latest scheme to augment its revenue, the streaming giant seeks to implement additional tools for advertisers by releasing its podcast advertising and publishing platform, Megaphone, in some European countries, such as France and Germany, in addition to Spain and Italy.

Last year, Spotify acquired modern podcast hosting platform for publishers, Megaphone. Spotify made the huge podcast acquisition by buying the hosting platform for $235 million. Even though the acquisition will not affect the Swedish platform’s podcast streaming services, it will, however, develop ads for Spotify’s own programs, which in return will bring in additional income.

In the past three years, Spotify has drifted its attention towards emboldening its podcast infrastructure.

In 2019, the Swedish streaming firm initiated a plan to sharpen its focus on podcasts. A move that was also slightly intertwined with generating advertisements, as entering the field of selling ads on podcast was an additional means to elevate revenues by dabbling in podcast ad sales.

While Spotify seems to be shadowing its success on all fronts – same as other streaming platforms – Britain’s competition regulator revealed on Tuesday a plan to unleash an investigation into the role streaming companies play in levying their influence within the market.

Naturally, as one of the leading streaming platforms, Spotify will also be subjected to regulatory examination.

Britain’s Competition and Markets Authority (CMA) has proved itself to be a mighty force by challenging digital markets and their role in empowering themselves at the expense of smaller tech companies and consumers.

Now, with its transition to direct its scrutinizing glance at streaming services, U.K. regulators will investigate the dominion of some of the leading names in the industry, including Spotify, Apple Music, Amazon, and Google’s video-sharing platform, YouTube.

“A market study will help us to understand these radical changes and build a view as to whether competition in this sector is working well or whether further action needs to be taken,” Andrea Coscelli, CMA Chief Executive, said in a statement.

These big players have managed to account for 80 percent of music consumption and conquered the market, playing a remarkable role in altering the streaming market’s outline for the past ten years.