As interested as advertisers may be in marketing to people based on the genre of music they're listening to, Spotify thinks brands may be more interested in advertising to people based on what they're likely doing while listening to that music.
Through its first-party data and its March 2014 acquisition of music analytics service
"We've been able to aggregate this idea of launching playlists as a proxy for the activity or mood you're in," said Spotify's VP-North America advertising and partnerships Brian Benedik, who noted that the streaming music service has roughly 400,000 playlists related to barbecues.
Now Spotify is applying that insight to ad targeting. Starting on May 1, advertisers will be able to target ads to the roughly 45 million people who use Spotify's free ad-supported service based on the playlists they stream.
At launch, marketers will be able to target playlists in 15 categories of activities and moods, Mr. Benedik said. Activity categories -- such as workout, commute and party -- will allow a sportswear brand to play an audio ad while someone's on their morning run or a coffee company to run a spot while someone's on their way to work. And mood categories like happy, chill and sad will let a brand like Coca-Cola play on its "Open Happiness" campaign when people are listening to mood-boosting music.
Spotify has been testing playlist targeting for the last few months with eight brands who are part of its customer development group, Mr. Benedik said, but declined to say which brands.
"This is not something that's just randomly thrown out there. It's a strategic evolution of the Spotify ads business going back a year and a half ago with the mobile licenses," Mr. Benedik said. He was referring to the company's December 2013 roll-out of a free ad-supported mobile service, which required the company to get approval from music license holders.
The news also appears to indicate that Spotify doesn't plan to back down from its ad business, even as rival streaming music companies like Apple's Beats and Jay-Z's Tidal eschew advertising revenue in favor of asking people pay a monthly subscription fee. Spotify does operate a paid subscription tier to its service, but roughly 75% of its users listen to the free ad-supported service. People who use Spotify's free ad-supported service, on average, listen to 148 minutes of music on Spotify each day, according to the company.
Spotify claims that its ad revenue has grown by 53% from the first quarter of 2014 to the first quarter over 2015 and, in that span, its mobile ad revenue has increased by 380%. However the company would not provide actual revenue figures, and Spotify only opened up a mobile revenue stream in December 2013.