Research
Interview Synopsis

Spotify-advertising revenue outlook & ad-supported margin drivers

  • Public Equity
  • TMT
  • North America

Audio streaming platform Spotify became the No.1 podcast platform in the US for the first time this year, effectively making it the largest podcast platform in the world. This rise to the top has coincided with growing revenue from ads run on its podcasts, which have become “margin-enhancing [and] very strong business” for Spotify, a former VP at Spotify Technology told Third Bridge Forum.

Click on the hyperlink below to access the full Forum transcript.

Spotify Podcast reaches No.1 as ad profits continue to grow

The Interview – which began with an overview of Spotify’s ad-supported tier monetisation strategy – discussed the advertisement volume in commercial radio versus Spotify music and podcasts, the role of podcasts in Spotify’s advertising revenue, and future market trends.

The specialist began by explaining how advertisements for music and podcasts differ on Spotify. While Spotify music listeners can expect 2-4 minutes of advertising per hour, podcast users are usually exposed to roughly 2 minutes, the difference coming from how they consume each product.

Although there is “lots of room for manoeuvre” in increasing the number of ads on its podcasts, the specialist said less advertising on podcasts is “neither here nor there”. CPM (cost per thousand impressions) margins are much higher on podcasts compared to music, the specialist explained, and Spotify still has plenty of inventory to monetise – something that is potentially more advantageous in the long run. 

“People will get turned off if they overdo [ads]. If you’re a business manager in that company, before they start increasing ad load, they’ll be asking if everything that we currently have has been sold, and the answer at the moment will be ‘no’”.

Increasing inventory on Spotify’s Audience Network is therefore more important for growing revenue, the specialist said. In recent years, Spotify has been successful in attracting owned and operated talent to its Audience Network such as Joe Rogan, Michelle Obama, and most recently, filmmaker J.J. Abraham, as well as other inventory through its acquisition of Megaphone and Anchor.FM. 

Over the next 3-5 years, the specialist said that the majority of ad revenue will come from content produced by the latter two platforms, with owned and operated content used more as a hook to gain subscriptions. “The Joe Rogans and whatever, big as they are now, they’ll be the premium, they’ll be important, they’ll be the thing that brings people in, but I don’t think they’ll be the majority of the revenue”. 

To access all the human insights in Third Bridge Forum’s Spotify-advertising revenue outlook & ad-supported margin drivers, click here to view the full transcript.

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