If Spotify’s advertising department were creating a new playlist, it would be called “ad techno.”

The music streaming app recently took the wraps off a revamped self-serve ad platform, which was part of an ongoing push to get more programmatic ad buyers into the service. Spotify now calls its self-serve advertising hub “ad manager,” renaming it from “ad studio” last month. It introduced the rebrand with new formats, such as a video ad unit and more expansive targeting. Audience segments quadrupled to more than 100, Spotify executives told Ad Age. Spotify also just opened ad inventory to Yahoo’s demand-side platform, a path to programmatic advertisers outside its self-serve system.

The self-serve rebrand, new ad tech tools and DSP cooperation are all signs of a more aggressive strategy by Spotify to attract a wider range of advertisers. Spotify also recently reorganized its sales team to focus on programmatic advertising; it reduced the size of the team by 40 members as it pushes deeper into automation.

“We’re investing heavily on this side of the house,” said Chloe Wix, global director of product marketing at Spotify. “We’re really looking to bring a much more advanced set of tooling to advertisers, which is definitely the motivation behind that ads manager rebrand.”

Also read: How audio ads outperform video

Audio ad tech has been playing catchup with other formats in digital, such as social, display, video and connected TV. The standardization of traditional internet ads has made it easier for advertisers to spend with publishers. Audio ads are more specialized than the others, which has been a point of resistance on Spotify. That’s why it has been developing video ads to complement the audio, making brands more comfortable with campaigns, Wix said. Meanwhile, new targeting options, with more audience segments, are meant to make the service more performance-driven. Advertisers can go from just running brand-heavy campaigns, with wide goals such as “awareness,” to direct-marketing ones with lead-generation and sales goals.

“With this relaunch, we really want to emphasize the fact that we are much more than just audio,” Wix said. “And that the trends of watching and browsing on Spotify are beginning to proliferate in such a way that is causing us to invest in products that are able to, sort of, bring forward both the audio and the visual.”

Strategy shift

Patrick O’Leary, associate director, client solutions, at digital advertising agency Kepler Group, recently started using Spotify’s ad manager for the first time, making ad buys for a major publishing brand. Until now, Kepler Group has mostly used Spotify’s hands-on managed services to coordinate campaigns on the app, O’Leary said. “For our larger activations, with very specific pieces, we still definitely want to utilize that managed service, but as we look into how audio fits in our day-to-day, I feel like the advantage of ads manager is there.”

The ad manager is good for dipping into and out of Spotify with strategic ad placements, and also for its targeting and performance-oriented campaigns, O’Leary said. “This allows us to be a little bit more flexible.” 

In the second quarter, Spotify’s ad-supported revenue increased 13% to $501 million year over year, according to its latest financial disclosure. Podcasts are one of the key categories for streaming audio and advertising, and eMarketer data shows that programmatic accounts for a small percentage of how ad deals get done in that space. This year, overall podcasts will generate $2.28 billion, a 16% increase from 2023, and 9% of the revenue will come from programmatic, according to eMarketer. In display advertising, more than 90% of it is conducted programmatically, according to the firm.

Streaming audio and programmatic are coming together, however. Last month, Axios reported that Disney and Spotify opened ad inventory to Yahoo’s DSP. Meanwhile, DSP Viant recently reported that streaming audio was its fastest-growing segment, doubling year over year in the second quarter, a faster rate than connected TV.

“For those advertisers that want to buy on an outcome, on an objective, [we’re] inviting them into ads manager to be able to do so,” said Sam Bevan, Spotify’s global head of emerging and scaled advertising, “but for those advertisers that are interested in working directly through their preferred DSPs, [we’re] also making sure that as much as our inventory as possible is available through that mechanism, as well.”

Automation hooks brands

Spotify is trying to achieve parity with other apps in the digital ad ecosystem when it comes to its ad tech products and targeting options through programmatic, Bevan said.

“It is all about how to increase our active number of advertisers on the platform,” Bevan said, “and a big part of why we are continuing to grow our investment in our automation, and our, what we're calling now, our newly branded ads manager tool is part of our two-prong strategy of how we're going to see growth.”

Spotify also is juicing up its ad-targeting segments. The ad platform has some deep insights into the listeners and their tastes, and Spotify turns those into interests for advertisers to reach. The “targeting menu” now includes more than 100 segments, a four-fold increase, Wix said. Among the hottest segments right now are hobbies, lifestyle, health and academics, Wix said.

With the ad manager revamp, Spotify also released new case studies around brands running campaigns for performance goals, such as increasing clicks to websites. That’s what travel brand Contiki did with a campaign that included vertical video, audio and audience targeting by age, location and device. Spotify’s case study said that the click-through rate from video ads was 1% compared to .6% on the audio ads.

“Something that we’re incredibly focused on is making sure that multi-format story that sort of transcends the world of video and audio is told very clearly,” Wix said, adding “It's about the totality of the Spotify audience and knowing that they can test with video within the platform, which hopefully will decrease some barriers.”

Kepler’s O’Leary said he also saw higher click-through rates on video ads with the campaign in the ad manager, which was the first time he had thrown video into the ad mix.

“It's been a nice addition to catch users when they are in an engaged moment,” O’Leary said. “And it also serves in the video podcast areas where they do seem to have a pretty strong amount of users who watch.”