Digital Advertising

Spotify wants to complement commercial radio not replace it as its programmatic play whirs into gear

By Seb Joseph | News editor

September 23, 2015 | 5 min read

Spotify wants to sell advertisers the incremental audiences it can offer to larger digital audio media buys as it prepares to fully open up its inventory programmatically for the first time.

The music streaming service is trying to become a more friendly place for brands as part of ongoing efforts to show investors it can monetise its free users. So far this year, sharper targeting and video streaming have beefed up this proposition and this month’s it’s launching a tool to show advertisers the extent to which its inventory can complement and extend a broadcast media buy.

It’s Spotify’s ‘make love, not war’ approach to a commercial radio industry it has disrupted but also become somewhat lost in. Planners aren’t sure whether Spotify is a “radio buy” or a “digital buy” said UK’s head of sales David Cooper. He told The Drum the service wants to be seen as a “digital audio buy” and that the media planning tool is its way of ensuring that message sticks.

For example, agencies can come to the app with a brief on what audiences they’d normally buy before served up a bespoke plan showing where the incremental reach can be gained. Part of the tool and consequently the insights it serves up are made up of the data it gained from a study conducted earlier this year with TNS.

It found that for listeners aged between 15 and 34, Spotify added a minimum of 14 per cent incremental reach to UK commercial radio stations, up to a maximum of 21 per cent. People are more likely to pay attention while listening on Spotify than they do to commercial radio, according to the report, which is expected given listeners usually flick through playlists and select tracks, whereas it’s not part of the radio experience. Listeners are most likely to be either be surfing on the internet or driving when they use the app’s free service

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“We’d expect to get results like this but it’s a good selling point to advertisers,” said Cooper. “There are clients that will look to use Spotify to reach an audience at certain times of the day, while there are others mainly use us for targeting. The future of Spotify will be more targeting options although I don’t think there will be anything new coming in terms of formats because video and audio are so important.”

The streaming service has the first party data to guarantee advertisers their messages will go out to specific audiences as oppose to the vast majority. It means it can be more creative and bespoke with ads, because it’s using the data from how people are using the ad to inform strategies.

That focus on targeting has also propelled Spotify’s push into programmatic, an area it has been hesistant to rush headlong into and follow rivals Pandora and iHeartMedia. Tests and engineering works are ongoing though the app will link its part of the programmatic stack with agencies’ offering so that they can buy its media directly.

Cooper said tests are being conducted with a similar tech provider to Global's Digital Audio Exchange (DAX), which works with data management platform Krux. It’s in the opening stages of testing display and then audio and video will follow ahead of a more concerted push across all three next year.

DAX’s involvement in helping Spotify set-up its programmatic does not mean the app plans to join.

“We’re not part of DAX,” said Cooper. “Together we’re really promoting the idea of digital audio within the agencies. So rather than squabbling over a small pot of money we can grow digital audio’s share of the audio market.”

Audio (along with TV) are tipped to be the next programmatic frontier with services hopeful more sophisticated automation can produce stronger campaign metrics. Earlier this year, GroupM’s Xaxis programmatic arm announced it able to access inventory from DAX, giving advertisers scale in the medium.

Jonathan Forster, Spotify’s vice president for advertising and partnerships across EMEA, said: “We believe that there is enormous growth potential in the audio advertising industry, not just in terms of the huge opportunity to connect with a hard-to-reach demographic through Spotify, but also in terms of the potential to grow the European market to the scale of the US audio advertising industry - which is worth around $8 billion; exponentially more than that of Europe currently.”

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