To increase revenue from customers who don’t pay a monthly fee but make up the majority of its user base, music streaming giant, Spotify, is taking on more staff to boost advert sales in Europe, Australia, and Canada.
“We are increasing our ads business marketing workforce by over 70% in Europe, Australia and Canada, and that’s off a pretty sizable base. We are investing in the advertising business. When it comes to long-term strategies, I think the days when advertising was less than 10% of our total revenue are gone,” Lee Brown, Spotify’s head of advertising business, said.
Spotify has also hired an adverts industry executive with 25 years of international experience to lead international sales, Lee Brown said without revealing the expert’s name.
With more than 356 million monthly active users and 158 million paying subscribers as of March 2021, Spotify is one of the biggest platforms in the world. The company makes its money through paid subscriptions and serving ads to non-paid users, and of the 365 million monthly active users, 210 million are ad-supported, accounting for about 12 percent of total revenue.
“An ad not only creates revenue for the firm, but it also lowers costs, as it leads to fewer songs being played and, in turn, modestly lower royalties to be paid,” Morningstar analysts said.
A spike in podcast content has also helped increase advertising revenue, as podcasts attract in more users, and being longer, allow more time for ads. As of the second quarter, Spotify carried 2.9 million podcasts, up almost 12 percent from the previous three months.
The company is planning to include more tools for advertisers, and is looking to avail its podcast advertising and publishing platform, Megaphone, in Germany, France, Spain and Italy.
Megaphone, purchased by Spotify last year, provides tools for podcasters to create ads for their own programmes, and to measure their reach. It currently hosts about one-third of the top 200 shows on Spotify and Apple.
Spotify has been working sedulously to improve and strengthen its platform, all in a bid to give users the best experience. In June this year, Spotify acquired Podz, a discovery channel improving podcast transcripts, an act aimed at providing support for and improving its booming podcast service. Podz’s AI-powered technology works by automatically generating preview clips of available podcasts and is more advanced than other service podcasters that create their podcast clips manually.
Spotify’s competition with rival Apple has however intensified after both companies launched paid subscription platforms for podcasters earlier this year. But for the first time this year, Spotify is expected to overtake Apple in podcast listeners, according to research firm eMarketer.
