Key insight:
The past few months have been a whirlwind for Spotify. In May, the streaming platform formed a $100 million partnership with Joe Rogan to exclusively stream his podcast. Soon after, it also reached deals with Kim Kardashian, Warner Bros. and DC Comics.
Spotify was hopeful its portfolio of big-name celebrities would be enough to attract advertisers despite trends that impacted podcast listening amid the Covid-19 pandemic.
A new deal announced today suggests things are moving in that direction. In a unique partnership, Omnicom Media Group will pay Spotify $20 million for podcast ads through 2020.
As part of the deal, OMG clients (which include AT&T, State Farm and McDonald’s) will have first access to Spotify’s rapidly expanding library of original podcasts through its proprietary Streaming Ad Insertion (SAI) service. The platform has more podcasts in the works featuring creators such as Jordan Peele, Paul Bae and Reba McEntire.
SAI, which launched in January, provides advertisers with a suite of analytics data, specialized in-app offers and targeted spots based on listeners’ playlists.
The latest deal with Omnicom represents the streaming platform looking to mature its ad platform to compete with podcast networks like Wondery or iHeartMedia (which released its own ad platform a month after Spotify launched SAI).
Unlike its competitors, Spotify did not participate in last year’s widespread bid for advertiser dollars in the Interactive Advertising Bureau’s podcast upfront. This year’s schedule for the event has not yet been released, although the IAB said it will take place virtually in September. Spotify has not yet announced whether it will take part.
SAI, as other podcast ad networks, comes with its own challenges.
“The only way to use SAI is with people that are consuming podcasts on the Spotify platform,” said Stephen Smyk, svp of podcaster and influencer marketing at Veritone One agency, noting SAI is not compatible with players like Stitcher, Apple Podcasts, Google Play or other podcast hosting platforms.
Though Smyk notes that Spotify accounts for a “very small percentage” of podcast consumption, Spotify execs hope their glossy new portfolio will grow its market share.
“Our investments are paying off. The data and results speak for themselves,” said Lee Brown, Spotify’s global head of advertising business, told Adweek ahead of the Omnicom announcement.
What makes podcast ads so valuable?
One thing driving engagement with ads might be their format. In addition to traditional prerecorded ads inserted into the show, podcasts often feature host-read ads. In these, the hosts of the podcast promote an item, typically with their own script and genuine opinion of a product.
Host-read ads can be controversial for some news podcasts. BBC, for example, vowed to not have hosts read ads (and put a warning bell before advertisements) so as to not confuse listeners. However, audiences respond well to host-read spots, Smyk said.
Omnicom’s deal will use SAI’s host-read technology.
Spotify offered host-read ads to sports brand Puma, an early tester of SAI. Puma’s host-read ads in the Spotify Original podcast Jemele Hill Is Unbothered resulted in ad recall lift by +180%, according to the streamer.
“We’re seeing a wave of innovation,” Brown said, noting Anytime Fitness, which created Spotify playlists for its virtual classes, and the U.S. Census Bureau, which bought a half-billion dollars’ worth of ads to encourage young people to fill out the 2020 census.
Last month, Spotify began testing in-app offers, which present an interactive, native alternative to promo codes and separate URLs shared in a podcast.
“The newer way is digital-based measurement solutions, like pixeling and other ways to determine when somebody has downloaded an episode of the ad and then came back and purchased at a later point,” Smyk said.
Spotify hopes to prioritize digital measurement moving forward. SAI offers advertisers data on impressions, reach and frequency of ads as well as audience insights like age, gender, streaming devices and listener behavior.
While audio media advertising is expected to decline by 23% this year due to the Covid-19 pandemic, its value to marketers will likely “hold up,” predicted GroupM in its mid-year forecast report.
“We are continuing to expand the scope of our podcast ambitions as we help to drive and capitalize on the incredible growth of the audio industry,” Brown said.
