Spotify podcast advertising revenue rises by 627% during Q2

Spotify played ads for Originals & Exclusives in the moments before the company’s quarterly earnings call. These included the True Crime show “Deathbed Confessions” and “Call Her Daddy,” a sex- and relationship podcast that Spotify just acquired in a $60 million deal. It’s funny to hear Alex Cooper, host of “Hey, Daddy Gang!” while investors log into an 8AM call. But the message was clear: Spotify is committed to growing its podcast platform.

It would be alarming if this area hadn’t seen significant growth, considering how many podcasting businesses Spotify acquired in the last few years. Podcast listening has increased by 30% over the past year among Spotify listeners, and 95% of all hours were consumed. Podcast ad revenues increased by 627 percent, exceeding expectations. Spotify credits this success to its triple-digit increase in year-over-year revenue at its studios (The Ringer and Parcast), Spotify Studios and Gimlet, as well as exclusive deals with the “The Joe Rogan experience” and Obamas’ Higher Ground. Spotify also mentioned its November purchase of Megaphone (a podcasting and advertising company).

CEO Daniel Ek stated that “The ongoing outperformance is limited by the availability inventory which is something we are actively working to solve.” We are now past the days when our advertising business accounted for 10% or less of total revenue. I anticipate that ads will continue to make up a significant portion of our future revenue.

Image Credits: Spotify

Spotify introduced paid podcast subscriptions in April through Anchor. Creators have the option to access certain content behind paywalls. Apple also launched similar features, although it is too early to predict how the subscriptions will affect creators and listeners. Spotify shared some information on its Audience Network audio advertising marketplace. Spotify has tripled its “monetizable podcast inventory” since April’s rollout. Spotify also reported a significant increase in unique advertisers, and an “increasing” rise in CPMs (cost-per-million ad impressions), although they didn’t give specific numbers.

However, Spotify’s power over podcasting means that creators have fewer options for monetization. Already, musicians are struggling to get better compensation. According to the Justice at Spotify movement, an artist gets $0.0038 for each stream. This means that to earn a dollar, a song must be streamed at least 263 times. While Spotify’s popularity has increased during this pandemic period, musicians have been struggling to get on the road due to streaming.

Ek mentioned live performances on Greenroom (Spotify’s Clubhouse Clone) as an option for musicians looking to boost their revenue during this morning’s earnings conference. Spotify has been testing live concerts to increase income streams in the last quarter by partnering with musicians like The Black Keys. However, small artists may not be able to trust Spotify due to its refusal to allow streaming to become a viable option to earn a living from their work.

Ek stated that live is meaningful for many of our creators and that it’s something they’re passionate about. He also said that Spotify has seen positive results with its digital live events so far. We want creators to have as many options to convert listeners into fans and super fans. This will increase monetization and make it easier for them to do so.

Spotify did not reach its monthly active user (MAU) target in Q2. However, other metrics showed a trend upwards like revenue and paid subscribers growth. Spotify attributes the MAU growth bump to COVID-19’s lingering effects and an issue Spotify experienced with third-party email verification.

Paul Vogel, CFO said that “In complete disclosure, it was an issue on my end.” It is estimated that the email verification change caused friction that affected about 1 million to 2million of MAU growth. This has been fixed and shouldn’t have an effect on Q3.

Spotify has 365 million paid subscribers, and 165 million of those (or 42.5%), are MAUs. This is still a lot more than Apple Music which boasted 60 million subscribers last year, but has not released any updated numbers since.

Publited at Wed. 28 July 2021, 16:54.05 +0000

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