Spotify’s big bet to increase ad revenues: selling playlists to brands

Spotify’s financial results have been the most-debated story in the music business this week, with a range of positive and negative conclusions drawn from the numbers.

If there’s one area of the financials which have left major rights-holders unanimously disappointed, though, it’s ad-supported revenues.

Despite a 98% rise in advertising revenues in 2015, Spotify’s annual non-premium cash stood at $219m (€195.8m) – just 10% of its total sales.

When you consider that 61m (69%) of Spotify’s 89m users were non-paying, and that rival Pandora took $933m from ads last year, you can see why labels want to see better return from Daniel Ek’s company.

(It’s worth saying this analysis doesn’t tell us how important ‘free’ was in attracting Spotify’s 28m subscribers to start paying in the first place.)

Now, Spotify has launched a new avenue to attract more cash from advertisers – and it’s got some attractive numbers with which to lure them in.

The Swedish company has announced that it has started selling overt sponsorship on its own playlists – which, as MBW readers will know, are now responsible for a billion streams every week.

“Think content plus context; The right message in the right moment.”

Spotify

Spotify has 400+ owned playlists to sell to advertisers, the most attractive (and pricey) of which will be the likes of Rap Caviar (3m followers) and Today’s Top Hits (8m followers).

Car manufacturer Kia was the guinea pig, sponsoring the New Music Friday playlist (8m+ followers) a few weeks ago to introduce its new Kia Sportage.

“So far, the results have been outstanding, both in terms of audience engagement and brand impact,” said a Spotify blog post.

It added: “Think content plus context; the right message in the right moment. Cardio or Power Workout are perfect for a footwear brand expanding from lifestyle shoes to workout sneakers. A QSR adding breakfast to the menu? How about Morning Commute? An entertainment company with a summer blockbuster teeny-bopper flick? Teen Party, of course. You get the idea…”

Other beta period US sponsorship partners have included McDonald’s and Target.

Sponsorship of Spotify playlists has launched in the US, with a similar setup now in beta in the UK.

Brands can adorn the playlists for a week at a time, during which they get their logo displayed plus the ability to control 100% of display ads served around the product.

Sponsors also get to control the first ‘commercial break’ of the playlists for free listeners.

It remains to be seen if Spotify will also sell branding space on Discover Weekly: the playlist which serves up a personalised selection of songs to users each week, and which has 40m listeners and just reached 5bn lifetime plays.

Music Business Worldwide

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