Spotify is making its audio ad inventory available to programmatic buyers in its latest effort to capture new ad revenue and make it easier for advertisers to target users listening to music on the go.
The music streaming giant has struck deals with Rubicon Project, The Trade Desk and AppNexus to make its mobile audio inventory available for purchase in near-real time, through private digital marketplaces. That means an ad buyer can now tweak and serve audio creative to a user based on what they know about the user -- listening habits and log-in data from Spotify and first-party data from a client, for example -- in a matter of milliseconds. The transaction is automated, and buyers and traders can bid on Spotify's audio inventory, alongside display and video inventory, in an auction-like environment.
Previously, the company sold audio ads through audio-only ad exchanges at a fixed price, and completed transactions through manual insertion orders.
The company has already inked mobile audio spending deals, and is in talks with major media agency networks, said Les Hollander, global head of audio monetization at Spotify. One of those networks is Omnicom Media Group, according to people familiar with the matter. OMG and Spotify declined to comment on the nature of the relationship.
"We didn't have the real-time optimization last year," said Jana Jakovljevic, head of programmatic at Spotify and former Rubicon staffer. "We were waiting for a programmatic standard for audio." That came in January when the IAB released its "Programmatic and Open-RTB Protocol 2.4," she said. "It gives the buyers more control in terms of optimization," she said.
The goal is to get its mobile audio inventory included in more programmatic buys with "video, display and audio all together" and to tap into the fast growth of mobile programmatic ad spending, he said. "Programmatic channels, and money set aside for new concepts and investments -- ultimately that's where the money will come from."
But it's been slow coming. Although it's been possible to buy audio through audio exchanges, somewhat programmatically, digital audio inventory historically has been bought by media agencies' isolated radio-buying departments, according to a couple agency executives. Spotify is hoping that will change with the ability to group audio with other programmatic ad buys and budgets, and with the massive growth of mobile programmatic spending.
Spotify has 100 million global monthly active users, according to the company. Among them, 70 million are free, ad-supported users, and 71% of total streams are mobile, said Mr. Hollander. In the U.S., Spotify has close to 50 million monthly active users, of which 75% are free, ad-supported users.
This year, mobile programmatic spending will reach $15.45 billion in the U.S. alone, and next year, mobile video programmatic spending will exceed its desktop counterpart, according to eMarketer.
The audio programmatic opportunity for Spotify is global, said Mr. Hollander. "I wouldn't make the assumption the U.S. is leading the way here," he said.
This year, global programmatic ad revenue from display and video ads will near $20 billion, according to IPG's Magna Global ad spending forecast. Spotify is hoping to capture at least $10 million of that revenue through its programmatic audio, video and display ad sales, Mr. Hollander said.
There's early demand from clients ranging from insurance, education and finance, he said. He wouldn't disclose specific revenue figures for mobile audio programmatic, but said, "We see the run rates improving on a daily basis."
Audio, unlike other ad formats, is also resistant to ad-blocking software, according to Spotify. That resistance will likely add to the appeal once audio is easier to buy programmatically.
Spotify is offering 15- and 30-second mobile audio ad slots packaged "value-ad banners." Advertisers can use their own data to inform those buys, layering it onto what Spotify already knows about the users' listening habits, age and gender log-in information, IP address and, to a degree, location according to which tower the user's cell phone is pinging.
For example, last year, a buyer may have said, "Here's an IO, I want to target people in Cannes," so anyone listening to Spotify in Cannes would get local ads, explained Mr. Hollander. This year, with the new programmatic capability, a buyer can tweak audio creative in real time to appeal to a user based on what the user is listening to at that moment. If it's a yoga playlist in the evening, the ad might be "more in the spirit of a chill playlist."
The move follows Spotify's recent ad expansion efforts. The company in May began letting marketers sponsor its owned-and-operated playlists, which often have millions of followers.
Last year, Spotify began offering marketers the ability to target ads to the millions who use Spotify's free service based on the playlists they stream. In addition to its first-party data, the company touts analytics from The Echo Nest, a music-intelligence firm it acquired in 2014.
iHeartMedia, which streams 858 live radio stations across the country through iHeartRadio, also recently announced the a programmatic private marketplace for its digital radio inventory in the U.S. Last spring, the company gave advertisers the ability to buy broadcast radio inventory programmatically, powered by Jelli.