Spotify Podcast Ad Revenue Surges 627% in Q2 - Latest Stats

Spotify’s Podcast Business Demonstrates Substantial Growth

Prior to this morning’s quarterly earnings conference call, Spotify featured advertisements for its exclusive content, including the true crime series “Deathbed Confessions” and the “Call Her Daddy” podcast, acquired recently for $60 million. The inclusion of host Alex Cooper’s voice in these ads, played as investors connected to the call, underscored a key message: Spotify is heavily invested in expanding its podcast offerings.

Podcast Listening and Revenue Surge

The company’s strategic acquisitions of podcasting entities over the past several years have yielded significant results. Among Spotify users who engage with podcasts, listening time has risen by 30% compared to the previous year, with total hours consumed increasing by 95%.

Podcast advertising revenue experienced an impressive 627% increase, exceeding initial projections. This success is attributed to substantial year-over-year gains from Spotify’s in-house production studios – The Ringer, Parcast, Spotify Studios, and Gimlet – as well as exclusive agreements with prominent shows like “The Joe Rogan Experience” and Higher Ground, the studio founded by the Obamas.

The November acquisition of Megaphone, a company specializing in podcast hosting and advertising solutions, was also highlighted as a contributing factor.

Advertising as a Growing Revenue Stream

CEO Daniel Ek stated that the company’s strong performance is currently constrained only by the amount of available advertising inventory, a challenge they are actively addressing. He further noted a shift in the company’s financial structure, stating, “The era of advertising representing less than 10% of our overall revenue is over, and I anticipate ads will become a significant component of our revenue stream moving forward.”

Podcast Subscriptions and the Audience Network

Spotify launched paid podcast subscriptions in April, utilizing Anchor – the podcast hosting platform acquired in 2019 – to allow creators to place specific content behind a paywall. Apple introduced a similar feature, and the long-term impact on both listeners and creators remains to be seen.

The company also provided updates on its Audience Network, an audio advertising marketplace. Since its introduction in April, Spotify’s “monetizable podcast inventory” has tripled. A “meaningful” increase in unique advertisers and a “double-digit percentage increase” in CPMs (cost per thousand ad impressions) have also been observed, though specific figures were not disclosed.

Concerns Regarding Creator Monetization

Increased platform control by companies like Spotify raises concerns about reduced monetization options for podcast creators. The impact of streaming platforms on musicians, who are advocating for improved compensation from Spotify, serves as a cautionary example.

The Justice at Spotify movement highlights that artists currently receive an average of $0.0038 per song stream, requiring 263 streams to generate a single dollar in revenue.

Exploring Live Performances as a Revenue Source

Ek suggested that live performances could offer musicians an alternative revenue stream. Spotify has been testing live concert integrations, partnering with artists such as The Black Keys. However, smaller artists may be hesitant to embrace the platform given its current streaming compensation model.

Ek expressed enthusiasm for live events, stating, “Live performances are significant for many of our creators, and we are excited about this opportunity.” He added that initial digital live events have yielded positive results, and Spotify aims to “provide as many opportunities as possible for creators to convert listeners into fans, and fans into dedicated supporters, thereby increasing monetization for those creators.”

Key Metrics and Challenges

While Spotify did not meet its target for monthly active users (MAUs) in the second quarter, other key performance indicators, including paid subscriber growth and overall revenue, showed positive trends. The company attributed the shortfall in MAU growth to the ongoing effects of the COVID-19 pandemic and a technical issue with its third-party email verification system.

CFO Paul Vogel explained that the email verification issue impacted approximately 1 to 2 million potential MAU additions, but has since been resolved and is not expected to affect the third quarter.

Out of Spotify’s 365 million MAUs, 165 million – roughly 42.5% – are paid subscribers. This figure significantly surpasses that of its closest competitor, Apple Music, which reported 60 million subscribers in 2019 and has not released updated data since.