spotify-audience-network

Spotify Audience Network: Into Spotify Ad-Supported Business Model

Spotify Audience Network is the underlying advertising infrastructure that supports its ad-supported user base. The Spotify Audience Network was born as the result of the acquisitions of Anchor and Megaphone. By 2022, Spotify had 273 million ad-supported users.

Spotify Audience Network origin story

Back in 2019, Spotify announced the acquisition of Anchor by explaining the mission of the company as an audio-first company.

In the announcement back in 2019, Spotify explained:

More than 10 years ago we founded Spotify to give consumers something they couldn’t get — music any time, anywhere, and at the right price. Along the way, we broke the grip piracy had on our industry and restored the growth of global music through paid on-demand streaming. I’m proud of what we’ve accomplished, but what I didn’t know when we launched to consumers in 2008 was that audio — not just music — would be the future of Spotify.

By 2019, it was clear that podcasting was becoming an opportunity as big as music.

Indeed, by 2022, podcasting would become so instrumental to Spotify’s growth that it was among the main drivers for its further expansion.

By 2022, Spotify had acquired various startups in the podcasting space (Podsights, Findaway, Sonantic, Chartable, Whooshkaa and Heardle), thus signaling its strategy skewed toward podcasting.

And the list of original and exclusive podcasts on Spotify kept growing.

What was the turning point for Spotify’s Audience Network?

Spotify’s acquisitions to build its ad-machine

In February 2019, Spotify acquired a leading podcast creator platform called Anchor.

At the time, the platform was powering over 80% of all new podcasts on Spotify.  

In December 2020, Spotify also acquired Megaphone, which was already the advertising and publishing platform of choice for enterprise podcast publishers like The Wall Street Journal and ViacomCBS.

Those two pieces of the puzzle gave birth to the Spotify Audience Network.

The advertising audio platform is powering up Spotify’s ad-supported base.

Thus, the ad-supported machine is driven by two main elements:

  • Streaming Ad Insertion (SAI).
  • And our Spotify catalog of Original and Exclusive content (Spotify Studios, The Ringer, Gimlet, Parcast, etc.).

What is Spotify targeting with its Audience Network

Contrary to other ad formats, podcasting was left behind. In that respect, Spotify understood the key issues podcasting advertisers faced, such as:

– Inability to target audiences with precision at scale.
– Limited insight and understanding of ad delivery and efficacy.
– Barriers to entry (high CPMs, lack of self-service, etc.).

Thus, among the first features Spotify’s Audience Network enables were:

– Confirmed Ad Impressions.
– Audience-Based Buying [ALPHA].
– Streaming Insights.
– Native Ad Placements [BETA].
– Creative Performance.
– Third-Party Brand Lift Measurement.

Making it easy for advertisers to launch campaigns

With a simple-to-use platform, advertisers can easily target podcasting users on top of Spotify based on their interests:

Advertisers can target users based on various parameters.

Read Also: How Does Spotify Make Money, Spotify Model, Who Owns Spotify, How Does Twitch Make Money, How Does SoundCloud Make Money.

Spotify Business Model

spotify-business-model
Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated €9.66 billion in 2021. Of these revenues, 87.5% or €8.46 billion came from premium memberships, while over 12.5% or €1.2 billion came from ad-supported members.

Economics of the Spotify Business Model

licensing-model-spotify
Spotify licensing deals affect its business model. The company runs on both a free service, which is ad-supported and a subscription premium service. They have different economics. The ad-supported business had a 10% gross margin in 2021, compared to 29% of the subscription-based business. That’s because the more the content gets streamed on the platform, the more that increases royalty costs for Spotify. That is also why the company invested in developing its content. Thus, in part transitioning from platform to brand.
spotify-model
The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Who Owns Spotify

who-owns-spotify
The multi-billion music streaming company Spotify is primarily owned by its founders, Daniel Ek and Martin Lorentzon. As of 2021, Daniel Ek has 16.7% ownership of ordinary shares and 31.9% of the voting power. Where Martin Lorentzon has 10.9% of ordinary shares and 42.9% of the voting power. Another key shareholder is Baillie Gifford & Co, a Scottish-based money management firm, followed by Morgan Stanley, T. Rowe Price, and Tencent.

Read Also: Business Model

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