Advertising Technology Spotify

Why isn’t Spotify part of your media strategy?


By Seb Joseph, News editor

May 4, 2016 | 8 min read

If Amazon is the heir-apparent for shopping data and Facebook the equivalent for social media, then Spotify wants to be the place advertisers turn to when they want streaming data on their media plans.

Why isn’t Spotify part of your media strategy?

The loss making business is pinning future successes on its ability to make the case for first party data in a third-party world. Having seen Facebook profit immensely from turning social media into the panacea for impersonal ads and Amazon become a retargeting powerhouse, Spotify wants in on the action.

Like its peers, the streaming service’s pitch to advertisers is its ability to provide clean, reliable first party data to hone their ad targeting. What’s different about Spotify is that it is now encouraging advertisers to move beyond targeting devices, to building media plans around a person’s state of mind.

For example, should a listener have two playlists with similar music on both, but one is for ‘chilling at home’ and the other for ‘working out’, then their data story becomes clearer.

In the former state of mind, they’re more likely to be relaxed, and consequently more susceptible to richer, native experiences; whereas with the latter state the same person might be susceptible to an ad for a health supplement.

Singing to the tune of advertisers

That’s just the tip of the iceberg for what brands should be able to determine from Spotify’s data, claims global director of business marketing Jeff Rossi. However, it’s taken two years of quietly assembling an ad stack and the proliferation of connected devices to get the scale needed to put the service in the shop window for brands.

“We’ve always had a native advertising experience, but our weakness has been when we’ve tried to just sell banner ads at a higher premium because people would say ‘why would I buy that?’,” concedes Rossi.

“Now we can forget about the screen and start thinking about the mindset the consumer is in. Let’s take Google Chromecast, the PlayStation 4 and a tablet device for example and use that on a media plan that looks past the device into the natural use cases.”

This is deterministic; when a publisher like Spotify requires users to log in with a single account across their devices. What information it can’t glean from the data is offset by third-party data provider Krux.

It’s a prospect further strengthened by the average Spotify session lasting more than two hours and the most voracious listeners are 18 to 34-year olds. Then there’s the fact that it’s used by around 100 million users, 75 per cent of which are using the ad-funded version of the service. Figures like that are made even more impressive when Netflix admitted it wouldn’t smash through the 100 million until sometime next year.

And yet for all the stats and ambition there’s a niggling sense that not enough brands understand Spotify’s worth. Why would they when it’s made more sense for the business to talk about it having the new Kanye album instead of outlining the intricacies of its programmatic platform. That’s changing as shown by the number of Spotify executives discussing the platform at this year’s Advertising Week Europe, conference and its search for a head of content programming and a head of global media.

2016 is all about programmatic for Spotify

One area most marketers will be keen to hear more about is Spotify’s programmatic play. It’s made no secret of its desire to be the dominant seller of programmatic audio, having already outlined its intent to make all its media available this way within the next five years. Currently, only display and video inventory is bought this way, though audio inventory is imminent.

While the media is being served via exchanges now, it could eventually all happen in-house. Trading ads this way is a possibility, according to Rossi, just not anytime soon. “Right now we’re running the water through the pipes and seeing where the leaks are, and if we feel that we can build a better system then we’ll consider it,” he continued.

Where programmatic will really prove its worth for Spotify is its ability to bring insight to audio and mobile data. Buyers can target listeners based on a person’s interests, what they’re feeling, their location or time of day using the service’s own data. All this and more is being made available as the business looks not just to demographic data but other incremental data too.

“What agencies are able to provide is insight and real knowledge, but if you got to market without insight then it’s like translating a language from English to Chinese and then back again – something gets lost,” explained Rossi.

“A marketer might have a really good vision for their brief that gets given to their agency but then it has to get translated back to 18 to 24-year old males because the marketplace isn’t ready for this smart brief yet. We’re trying to offer a solution that’s closest to the brief.”

Getting advertisers to trust it can get closer to that original idea is easier said than done, especially when many are concerned with viewability and traffic fraud. To that end, Spotify has struck a number of partnerships to prove it doesn’t need to mark its own homework; from Moat and Google to measure the viewability of its desktop leaderboard and video campaigns as well Nielsen and ComScore to track the effectiveness of its ads.

Crafting a better story for advertisers

Spotify has done a fine job keeping its service free for the last couple of years which is why its plan to expand its offering beyond programmatic marketing platforms (PMPs) seems like a straightforward solution.

“Similarly to Facebook, Spotify is on track to consolidate its deterministic and transparent media buying,” said Katrina Lehismae, head of media at Roast. “The main question is around the art of precision advertising. We are close to delivering data driven real-time audio ads on Spotify which will combine demographic, social and location signals but for me the success of the Spotify programmatic approach relies on brands and agencies understanding when to deliver ads to the audience that is most engaged at the moment that they are most likely to convert.”

Furthermore, Art Muldoon, chief executive of Accordant Media (whose demand-side platform plugs into Spotify), is adamant that the potential of advertising on streamed music session has ‘unlocked the potential of radio all day long’, whereas previously they were only interested in drive-time

“If you can target against playlist, age, geography, and time of day, that data becomes immensely powerful,” he said. “If you look at verticals like retail, that’s a very effective targeting (and retargeting) tool.”

It’s now or never for Spotify to put some skin in the ad game. Buoyed by $1bn investment from its investors in March, the business is out to make millions from free music. Already this year it has brought its Billboard display format to mobile, which guarantees 100 per cent viewability. Not to mention the arrival of video content from publishers like the BBC, Vice Media, Maker Studios, ESPN.

“We’re the largest ad supported streaming content service of any kind and the connectivity that we can offer to our users in all these different parts of the day is something marketers need to be aware of,” said Rossi. “I feel like the industry is in a transitional period; it’s figuring out a lot of latent behaviours and I feel like now more than ever we see the light at the end of the tunnel.

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