Specialist
Former VP at Spotify Technology
Agenda
- Evolving ad-supported tier monetisation strategies from Spotify (NYSE: SPOT)
- Ad revenue and gross margin drivers
- Podcast ad monetisation vs music, focusing on Spotify’s acquired Anchor and Megaphone platforms
- Potential advertising impact of future subscription models
- Discovery tools and evolving marketing spend by labels
Questions
1.
What is Spotify’s perception of the ad-supported tier and how does that inform the company’s strategic options around the ad-supported business? It talks about it as a feeder for the premium tier.
2.
Can the free tier take a higher ad load on the music side? How many ads are users typically presented with when listening to one hour of content? Is there scope to increase this?
3.
What improvements could Spotify make to its sell-through rate, or how significant would that uplift be if it wanted to maximise the existing user base? I know there are some commercial reasons why it wouldn’t do that.
4.
Is there a difference between the ad networks for music vs podcasts, considering infrastructure and monetisation?
5.
How much advertising will a free user typically be exposed to over an hour of dynamically inserted programmatic content? It’s presumably slightly less than music, where a user could get it between tracks, whereas there are pre- and post-roll options for podcasts, which are typically slightly longer.
6.
How different are the CPMs for podcast vs music? Experts in previous Interviews have spoken about CPMs in the podcast market being USD 60, even as high as USD 80. I’m not sure if that’s an average or a high-water mark. What are your expectations for podcast CPMs?
7.
How does Spotify’s revenue from podcasts change? The music ad revenue is subject to either the minimum guarantees or the headline rates agreed between the record labels and between Spotify and the publishers. Presumably it’s not the same for podcasts – the host or creator doesn’t take 75%.
8.
Anchor talks about having an RPM [revenue per mille] vs a CPM, and it’s not doing a flat percentage share with the host or podcaster. How does that work? Is that applicable only to the longer tail and the top talent will have bespoke deals?
9.
What hypothetical share could podcasters such as Joe Rogan and the top talent negotiate? Presumably, they will want to participate in some of that advertising revenue, or do they forgo that as part of the licensing deals?
10.
How do you assess the consumption mix across the owned-and-operated portfolio vs Megaphone vs more Anchor.FM-type content?
11.
What metric would you use for free tier ARPU? Where could that go as a result of the changes being made around podcasts? It makes a lot of sense in premium, but do you consider ARPU as a metric the same way in advertising?
12.
If you compare ARPU to the premium tier, it presumably must have been running at a discount. Would you expect Spotify to close this or will the premium tier always be higher ARPU?
13.
We talked about podcasts having perhaps two minutes of ads per hour vs music, which is perhaps 2-4 minutes. Commercial radio is higher than that at 7-10 minutes. If it’s around two minutes for podcasts, how many separate impressions is that? How many separate ads are normally served in that time, or what’s the average duration of a podcast offer?
14.
Do hosts on Megaphone place most of their ads themselves or are more letting Spotify’s network do it for them?
15.
There are many variables and it isn’t clear how it will play out over the long term, but would you expect owned-and-operated content to drive the majority of podcast consumption or listeners for Spotify vs Megaphone content vs Anchor? I imagine the company has slightly different monetisation dynamics.
16.
How difficult is it to convince the hosts or content creators to become part of the Audience Network? In the most recent report, Spotify talked about the ad-supported tier’s performance and it being largely driven by new hosts joining the Audience Network. Would this be a relatively easy sell, because the company is talking about CPMs increasing 40% and fill rates increasing by 10% in podcast publishers?
17.
Why would a publisher or podcast creator stay with a player such as Acast? Is the advertiser network and the demand for that as deep as Spotify’s? I imagine Spotify would have the larger or largest ad network.
18.
Wouldn’t an advertiser rather just have one podcast budget and give it to the platform with the largest reach and the best targeting, in this case Spotify?
19.
What margin uplift is entailed by self-serve placement vs through a representative?
20.
How might gross margins evolve for the ad-supported tiers longer term? It’s hard to unpack because there are the headline rates to labels and publishers, minimum guarantees, which skew the picture, and podcast content spend now being thrown into the mix.
21.
If another podcast infrastructure player such as Acast is placing ads within content that’s then distributed via feed to Spotify, does Spotify receive any of that ad revenue?
22.
I know it’s nascent, but is most of the consumption and inventory available on Spotify being hosted either directly or through the Megaphone or Anchor platforms, or is a substantial share still coming through Acast and others?
23.
I understand label marketing spend is managed by a separate team, but how could Discovery potentially be incorporated into the broader strategy? Discovery is where an artist or label would take a lower cut or Spotify would charge a commission for priority placement of that specific track for relevant users within playlists. How might this develop?
24.
How large could the ad-supported tier get relative to premium? We discussed 10% of revenue. Will this be a strategic priority for Spotify?
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