- Spotify reported its most profitable quarter ever, driven by ad sales and subscriber growth.
- A leaked deck shows how the music-streaming service is seeking a bigger slice of video ad budgets.
- Spotify’s ad sales growth has slowed, and it remains a smaller player in the ad market, however.
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Spotify has been trying hard to boost its pitch to advertisers.
The music-streaming service has been pushing into automated sales to grow its appeal with small- and medium-sized businesses. It has a new in-house ad agency and generative AI ad product to make audio ads easier to create. And it held its first NewFronts presentation this spring to push its growing video inventory, including video podcasts and music videos.
Spotify just reported its most profitable quarter ever, helped by a 13% increase in ad sales and 12% growth in subscribers to its premium (ad-free) services.
But ad-sales growth slowed from an 18% increase in the first quarter. Advertising makes up 12% of Spotify’s total revenue, even though Spotify has been trying to get that share to 20%.
It’s also a bit player in the ad market. Emarketer predicted Spotify would make $2.06 billion in revenue this year, trailing other long-tail players like Pinterest, which is forecast to generate $3.65 billion, and ad giants Alphabet and Meta, which are forecast to bring in $204.92 billion and $154.16 billion, respectively.
On Spotify’s Q2 earning call, execs attributed the ad weakness to volatility in the ad market and strong subscriber growth, which has shifted the company’s revenue mix in favor of subscriptions.
Spotify’s automated and self-service ad offerings are gaining traction with advertisers, though it may have more work to do to be seen as a competitor for social-media video ad dollars, said Andrew Sandoval, VP of biddable media at Croud, a digital ad agency.
“Audio is a different space than Snap/Pinterest,” he said in an email. “Sure, they compete for those dollars, but Spotify isn’t competing for that user attention necessarily.”
Spotify’s current pitch to brands, laid out in a 50-page advertising deck obtained by Business Insider, touts a GWI study showing 92% of Spotify users use it as part of their daily routine, giving advertisers many moments to reach consumers. Spotify says its ads beat TV and social media on metrics like reach and attention and can drive users to purchase.
Spotify wants advertisers to know it doesn’t just sell audio but video and display ads and that it offers advertisers multiple ways to buy and measure ads in a brand-safe environment. It pitches itself as popular with Gen Z and a home for big-name creators from Taylor Swift to Trevor Noah.
Scroll down to see select slides from Spotify’s advertising deck.
Spotify makes its case to advertisers.
Spotify
Spotify says people spend up to two hours per day on the platform, with 92% of users calling it essential to their daily habits, and that that time spent translates to more attention for brands.
Spotify touts its ability to personalize the experience for users.
Spotify
The music streamer says it provides reach beyond TV and social platforms.
Spotify
Spotify says it can help advertisers reach at least 22% more consumers on top of TV and socia-media campaigns.
Spotify says advertisers’ ads get more engagement than they do on other platforms.
Spotify
It says its audio and video ads combined lead to higher purchase intent and sales than audio ads alone.
Spotify
Spotify lays out how it’s evolved from a utility to a source of personalized entertainment.
Spotify
It wants to be known for shaping cultural trends.
Spotify
Spotify wants to be known as a destination for podcasts, not just music.
Spotify
Spotify says its podcast ads are more effective than podcast ads in general.
Spotify
It says most people watch video podcasts on Spotify with video in the foreground.
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Users can’t skip or mute Spotify’s in-stream video ads.
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Spotify emphasizes it’s a brand-safe environment.
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Spotify describes how people use the service in different ways throughout the day.
Spotify
Audio podcast usage peaks during the beginning of the workday. Music listening is heaviest in the afternoon, while video viewing peaks in late afternoon, the deck shows.
Spotify plays up its appeal with Gen Z.
Spotify
It says its video, audiobook, and personalized music features are especially popular with that cohort.
Spotify lists some of the popular creators whose work is found on the platform.
Spotify
They include Taylor Swift, Trevor Noah, and Tyla.
Spotify provides a variety of ways advertisers can buy ads.
Spotify
There’s managed buying for specific campaigns, objective-based buying for small- to medium-sized businesses, and automated buying for always-on campaigns.
Spotify lays out different ways it helps advertisers target people.
Spotify
Advertisers can target people by broad segments like age and gender, platform, time of day, type of music they listen to, and more.
It measures how many people a campaign reached, what emotions they generated, and if they got people to take an action.
Spotify
Spotify says it can help brands grow awareness as well as drive sales.
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Spotify also described a campaign from Rockstar.
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The energy drink worked with Spotify to create a digital concert series on Spotify. The campaign included a playlist generator and gave away free Spotify Premium subscriptions to Rockstar purchasers. The campaign reached 10 million listeners and got press coverage for Rockstar, according to Spotify.
A TV network used Spotify to run a tune-in campaign.
Spotify
A TV network ran podcast and music ads to drive interest in a series premiere, which led to tune-in lifts of 37% and more, according to Spotify.
Another case study describes an electric car company using Spotify to reach a tech-savvy audience.
Spotify
The carmaker used Spotify’s audience network to reach wealthy, urban progressives, which led to increases in awareness, purchase intent, and positive associations with the brand, the deck said.
A burger chain used Spotify to drive visits and sales.
Spotify
The chain ran video, display, and audio ads targeting Hispanic customers, helping boost restaurant visits, according to the deck.
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