As Spotify surpasses another milestone, The Drum catches up with the platform’s global sales lead to find out how it is innovating to monetise listening habits and why it’s still focusing on a people-based approach.
Spotify has been nothing if not tenacious in its charm offensive on advertisers of late. In the midst of YouTube’s brand safety furore, it positioned itself as an ideal alternative to answer marketers’ growing concerns around transparency, and now as it gears up to liaise with agencies in and around Cannes’ la Croisette, it wants to make sure that its people-based approach to marketing doesn’t go unnoticed.
The music streaming platform now boasts 140 million monthly active users, marking a year-on-year increase of 40%. Figures from March indicate that 50 million of Spotify’s user base subscribe to the ad-free version of the service but it's understood the largest part of the business is still fuelled by advertising.
Online streaming is poised to become the largest source of global recorded music sales this year, with revenues from services like Spotify and Apple Music surpassing sales of CDs and vinyl for the first time, according to PwC. Streaming revenues are forecast to clock in at $9.1bn this year, with growth being driven by further adoption around the world. While Brian Benedik, the brand’s global head of sales acknowledges that Spotify’s stirring growth is partly down to the streaming experience becoming more “mainstream” he believes there are other factors at play.
He gives a nod to the platform's data-driven and fun approach to marketing itself, part of which involved it rounding off 2016 with a series of posters underlining how ‘weird’ the year had been, as well as the return of “major catalogues” to the service’s some 30m-strong library such as Taylor Swift and Prince.
Keeping the product fresh, though, is something Benedik thinks also plays a huge part. “As the leader in this space we carry the burden of having to innovate all the time, so users expect us to be able to innovate for them on our behalf,” he mused cautioning that innovation doesn’t just mean robots.
“Our approach to product it twofold: we feel that algorithms and machine learning can really help with the discovery of new music and new playlists, and when you have 140 million users around the world it’s very tough manually to build playlists for all of those people; so we do believe that algorithms and machines can make this more efficient.
“But in the same sense we do believe that human curation plays a big part too,” he continued, pointing to the platform’s internal curation team who compile playlists like RapCaviar and its popular Throwback Thursday. “So I think this two-pronged approach to product and discovery has certainly helped us continue to grow.”
What Spotify itself has discovered over the past year is that there is an increasing appetite for automated digital audio ads. The platform has been attempting to lead the way in serving up audio ads this way since striking deals with Rubicon Project, AppNexus and the Trade Desk to open up its inventory little over a year ago.
Spotify has made no secret of its desire to be the dominant seller of automated audio inventory, but Benedik admits it has been "overwhelmed" with how its marketplace has grown.
Spotify also offers automated ads across display and video which are significant for the platform, but such arenas that are already "pretty crowded," said Benedik, adding: "[The audio] marketplace has exploded for us and we are seeing quite a bit of what’s been formerly terrestrial radio money shift over to programmatic audio placements."
He continued: "I think for brands and the agencies what they’re enjoying is much more of a data-enabled approach to investment so it’s not just placing manual audio buys, they’re being able to do it layering on some interesting data points programmatically now that they haven’t been able to see before."
These data points are where Spotify's people-based approach to marketing comes in. Having been singing the praises of stitching together individual's cross-device journeys since inking a deal with LiveRamp in the US earlier this year, the company is now honing in on this strategy. It's clear that it will be pitching to agencies and brands at Cannes around the the power of 'persistent IDs' which rely on insights gleaned from users' habits rather than their cookies to target ads.
Over the past 12 months both Google and Facebook have been dogged by questions around transparency in terms of both measurement and brand safety. While the dust has somewhat settled following moves by the duopoly to appease marketers and brands, Benedik hints that Spotify's access to first-party data and listening habits could help Spotify scoop up budgets once previously reserved for the big boys of tech.
"We think it’s something only a handful of platforms can do very well, including us ... it’s one of the reasons that some of these big multi-national brands like the Samsungs and the Heinekens and the Microsofts and Procter and Gambles of the world are working with us a lot closer than they ever have; in part because they realise this is a powerful combination and they don’t see that or get that from any other platform out there."
Whatever is next for Spotify, it's sure to be a busy year for the company's ad business. With a rumoured public floatation on the horizon and several new hires in the form of WPP executives there's no doubt it will be working closely with both agencies and brands to convince them that a high-fidelity understanding of its audience can bear fruit.