Spotify was and still is synonymous with musicbut since the end of 2019 your commitment to podcasts It has been so massive that it does not hide the interest of the Swedish company in becoming the true leader in the sector.
In the early days of the so-called ‘Podcast Wars’, Spotify tried to eat up Apple Podcast and other checkbook-based alternatives. He signed Joe Rogan and many others to get his own catalog of exclusive programs, breaking in a certain way the idiosyncrasy seen until then in podcasting, where the exclusivity model had hardly been seen.
Since 2019 it has also invested in the acquisition of startups in the sector such as Gimlet Media -producer- and Anchor, today the leading benchmark in free hosting for podcasts. The idea was clear: promote the sector to grow with it.
Along the way this trip has also had its bumps. Without going any further, a few days ago announced the closure of its own production studios. The company has not given too many reasons, but everything indicates that it has bought so many previously independent studios that there was no room for its own.
But, What has Spotify been chasing so far with this bet and what has it achieved?
You come for the music, but they want you to stay without paying for the podcasts
One of the most important benefits of podcasts for Spotify and that was seen from the beginning is that they brought more content to the platform without having to pay anyone. While the music royalties were eating a good part of their profitin the podcast, removing their exclusive bets for which they have paid, many independent podcasters have uploaded their work to Spotify for nothing thanks solely to the possibility of broadcasting.
It seems obvious, but that it is free, it is really important for Spotify, a company that despite its income is not yet completely profitable. In fact, expected in 2022 That’s when you start to glimpse that possibility.
To get an idea, when they presented their Q3 accounts of 2021 -the last ones- its income was 2,501 million euros, growing 27% year-on-year in the third quarter. But with one important difference: Premium user revenue grew 22% year-on-year, while ad revenue was especially strong, growing 75% year-on-year to €323 million.
Much of that improvement in ad revenue comes from the podcast, a medium that by themes allows to better understand and segment the audience, and therefore monetize it with ads. Bottom line: It’s easier to know which ads to show someone if they’re listening to a fiction, finance, or tech podcast than it is if they’re listening to Justin Bieber or Muse.
Spotify has so far about 400 million users of which about 180 pay a subscription plan. It is a very high conversion rate, but the income of that majority that does not pay is barely 10% of the total. And it is where the Swedish company wants to tighten to be more profitable. Daniel Ek himself has publicly acknowledged this.
“Our podcast business was driven by strong double-digit year-over-year growth at Spotify’s existing studios (The Ringer, Parcast, Spotify Studios and Gimlet), along with the acquisition of Megaphone and the exclusive licensing of the Joe Rogan Experience. , Armchair Expert with Dax Shephard and Call Her Daddy”, they explained in the results note.
From the freemium model to better segment audio ads
To harness all those ears, Spotify has created a vast marketplace for advertisers known as the Spotify Audience Network (SPAN).
SPAN – a name that, when it comes to advertising, bears a somewhat comical resemblance to SPAM in its acronym – allows advertisers of any size to promote their message through different forms of audio while targeting individual users based on their listening habits, something that traditional radio cannot offer.
We’ll see if this bet works for Spotifyand if non-paying users become the next manna for a platform that revolutionized the music market ten years ago, but even with those it hasn’t managed to be as profitable as the big companies that have been built on advertising as core business.