The platform has placed large bets on creators such as Jemele Hill and Alex Cooper, but all eyes are on its ad tech.
Podcast ads will become a more prominent part of Spotify’s ad business, which has been a major focus for the company.
While Spotify has emerged as the dominant force in podcasting, the industry still lacks much of the infrastructure required to support a robust advertising business.
- For example, while Spotify claims to have 4.4 million podcasts on its platform, only 14% of them currently generate revenue for the company.
- Other challenges, such as the difficult task of bringing brand safety to audio content, remain unresolved.
- The company must overcome the technical constraints that are holding back the medium.
Marketers’ focus on audio
The gradual increase in listenership has encouraged marketers to devote a greater portion of their budget to the medium.
- Spotify signed a $20 million advertising deal with Omnicom Media Group in 2020.
- Spotify’s podcasts generated $215 million in ad revenue in 2021.
According to a May report from the Interactive Advertising Bureau, podcast advertising will reach $2 billion this year and $4 billion by 2024.
Despite the increase in podcast advertising spend, Spotify faces a number of challenges in its efforts to turn the channel into a profit centre. For example, podcast advertising accounted for only 2% of total revenue last year.
Despite these advances, one unresolved issue remains: brand safety. Marketers want to know the environment in which their campaigns will operate, but the improvisational nature of audio makes this difficult. To address the issue, Spotify has collaborated with Integral Ad Science on the development of a tool that will allow it to classify podcasts based on their content.