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 2023, Spotify had 379 million ad-supported users.

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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.

Key Highlights

Spotify Audience Network Overview:
- Serves as the fundamental infrastructure supporting Spotify’s vast ad-supported user base, providing a platform for advertisers to reach their audience.
- Emerged as a result of Spotify’s strategic acquisitions of Anchor and Megaphone, which were instrumental in shaping the company’s approach to audio content monetization.
- By the year 2022, Spotify’s ad-supported user count had expanded to a remarkable 273 million, underscoring the considerable reach and impact of the Audience Network.
Origin Story and Podcasting Focus:
- In a transformative move in 2019, Spotify transitioned from being solely a music streaming platform to positioning itself as an “audio-first” company. This strategic shift aimed to recognize and leverage the broader potential of audio content beyond music.
- This shift was further evidenced in Spotify’s emphasis on podcasting, as it foresaw the burgeoning opportunity in this space.
- By 2022, podcasting had grown to play a pivotal role in Spotify’s growth and expansion, demonstrating the prescience of their podcast-focused strategy.
Acquisitions and Ad-Machine Formation:
- Spotify’s acquisitions of Anchor and Megaphone proved critical in forming the backbone of the Spotify Audience Network.
- The acquisition of Anchor in February 2019 was significant in that Anchor was powering over 80% of the new podcasts on Spotify at the time. This cemented Spotify’s position as a key player in the podcasting realm.
- The subsequent acquisition of Megaphone in December 2020 bolstered Spotify’s position by incorporating Megaphone’s advertising and publishing platform. This combination was integral in bringing the Spotify Audience Network to life.
Components of the Ad-Supported Machine:
- At the core of Spotify’s ad-supported ecosystem are two primary components powering the Audience Network:
  1. Streaming Ad Insertion (SAI): This dynamic technology inserts ads into the streaming content seamlessly, ensuring that ads are contextually relevant and smoothly integrated into the user experience.
  2. Original and Exclusive Content: Spotify’s extensive catalog of original and exclusive content, developed by entities like Spotify Studios, The Ringer, Gimlet, and Parcast, adds depth and value to the ad-supported experience. High-quality content enhances user engagement and provides fertile ground for effective advertising.
Goals of Audience Network:
- Spotify recognized the challenges faced by advertisers in the podcasting landscape, including the inability to precisely target audiences at scale, limited insights into ad delivery and effectiveness, and high entry barriers due to costs and limited advertising tools.
- The Audience Network was conceived with the objective of addressing these challenges, providing solutions that enhance the effectiveness and accessibility of podcast advertising.
Features for Improved Advertising:
- The Audience Network introduced a range of features designed to empower advertisers and enhance the efficacy of podcast advertising:
  - Confirmed Ad Impressions: A feature ensuring the validation of heard ads, enhancing accuracy in measuring ad reach and impact.
  - Audience-Based Buying (Alpha): Advertisers can target specific audiences based on demographic and behavioral data, resulting in more relevant and resonant ad experiences.
  - Streaming Insights: Insights into ad delivery, listenership patterns, and engagement provide advertisers with valuable data for optimizing campaigns.
  - Native Ad Placements (Beta): Seamless integration of ads into the listening experience enhances user engagement and makes ads feel organic.
  - Creative Performance Insights: Advertisers gain insights into the performance of their creative content, facilitating refinement and improvement for future campaigns.
  - Third-Party Brand Lift Measurement: Measurement tools enable advertisers to gauge the impact of their campaigns on brand awareness and perception.
Simplified Ad Launch for Advertisers:
- The Audience Network’s platform is designed to be user-friendly, providing advertisers with the tools and capabilities to target podcast users based on their interests.
- Advertisers can utilize a variety of targeting parameters, enabling them to craft campaigns that resonate with listeners on a personal level, ultimately enhancing engagement and effectiveness.

Key Takeaways

In summary, the Spotify Audience Network encapsulates Spotify’s strategic evolution into an “audio-first” company, the acquisitions that formed its core, the components that power its ad-supported ecosystem, the goals of enhancing podcast advertising, the innovative features introduced, and the user-friendly platform for advertisers.
This comprehensive approach underscores Spotify’s commitment to amplifying audio content, enriching the user experience, and providing advertisers with impactful tools for success.