Spotify’s path to podcasting dominance has begun to hype: immediately spend hundreds of millions of dollars on the highly regarded podcast network Gimlet Media and the podcast creation app Anchor. Now, nearly two years later, the company is still spending, but this time the goal is to conquer the podcast advertising market.
Yesterday, the company announced that it had acquired Megaphone, a podcast hosting company, for $235 million. The company also inserted and sold dynamic ads for podcasts. Although the acquisition is large, it is not as fancy as some of the company̵
Podcast advertising has become more and more complex, and can be exchanged in and out based on who is listening and which advertising transactions are in progress. The so-called dynamic advertising is a big change from the static podcast advertising that is permanently built into the program. Now, podcast advertisements behave more like the Internet-a carousel advertisement that targets a person based on the audience’s needs of the day. Nevertheless, targets for these users are still limited by the lack of user data. The hosting service can only know the location of the listener, the type of device it is listening, and the application it is listening on. This completely changed Spotify.
Spotify knows the listener’s name, billing information, their residence, age, favorite music, favorite other shows, who they are friends with on Spotify, the equipment they use, and a lot of other data. It still doesn’t know as much about online people as Facebook or Google, but it knows much more about its audience than podcasts have before.
Naturally, Spotify uses its data to sell and insert ads through its proprietary streaming advertising insertion (SAI) technology, which debuted in January for internal display. These advertisements are inserted in real time, rather than replaced before listening. This means that Spotify’s system determines in real time which advertisements a specific listener should listen to based on its data and the goals of various advertising transactions currently achieved by Spotify. run.
Through the megaphone transaction, SAI display will be available outside the Spotify network. Therefore, if advertisers or third-party podcasters want to effectively attract Spotify’s 320 million monthly listeners, they must pay Spotify regardless of whether they do so. I went to Spotify’s advertising sales team and asked to participate in the show or through the podcast on Megaphone to access SAI. Even if Spotify does not sell performance ads, you can still get paid because it still provides distribution services. (Spotify is not the only company with a podcast distribution, hosting, and sales department; so are iHeartMedia and SiriusXM.)
Having a hosting service also allows Spotify to access data about other web shows like never before. Only the network and its hosting service provider can know how many downloads the show has received, where the listener is based, and how the plot is played in general. Now Spotify will also own the data. For example, the loudspeaker currently says that ESPN is a customer. This means that Spotify can know the performance of ESPN podcasts, which is coveted information, especially considering that Spotify owns The Ringer, and CEO Daniel Ek said that the company was acquired to establish a “new ESPN.”
Since its full entry into the podcasting field in 2019, Spotify has spent more than $500 million in acquiring the company, as well as Joe Rogan, Kim Kardashian West and Michelle Obama in space (Michelle Obama) and other stars. Now, it has a podcast creation application, multiple successful networks and a podcast player. With Megaphone, it also has hosting services and an effective advertising network. It itself has been set up as a part of the podcast ecosystem that external networks must ultimately participate in.
In order to do this, Spotify must make SAI attractive enough so that podcasters are willing to change the hosting network to obtain its more specific advertising technology, and advertisers are also willing to switch from buyers for the same access rights. In order to achieve this, Spotify must become the favorite place for people all over the world to listen to, especially streaming media, which does not seem to be realized yet. Apple may still maintain its lead, at least in the US, although if Spotify continues to obtain exclusive deals, it may force listeners to switch.
This is a straight-through route for all Spotify transactions, forcing people to use its services for access, whether it’s access to advertising technology or certain programs. Whether we like it or not, all of us may eventually have to use Spotify.