Spotify earnings signal a return to normalcy among listeners
Spotify proved resilient in its second-quarter earnings, while also revealing consumer trends that should put the broader ad industry on notice.
The digital audio-streaming giant said it began seeing a modest impact on the number of hours streamed through its platform. “As of June 30, global consumption hours have recovered to pre-COVID levels,” the company said in its second quarter earnings release. “All regions have fully recovered with the exception of Latin America which is approximately 6 percent below peak levels prior to the global health crisis.”
Consumption trends by platform, meanwhile, are beginning to return to normal: in-car listening at the end of the quarter was less than 10 percent below pre pandemic levels, Spotify said, having recovered from a 50 percent decline in April; more consumers on the road may lead to other channels such as out-of-home attracting more demand from marketers, for example. Areas where the spread of COVID-19 appears to be slowing, such as Asia-Pacific region and European Union, led the recovery in consumption, according to Spotify.
The company said it also saw an increase in payment failures from its customers stemming from the previous quarter, but “things rebounded significantly in June as we saw increased re-activations and a step down in churn,” the company said.
Although ad-supported revenue saw a steep decline of nearly 21 percent year-over-year to $154 million, it saw “significant improvement” in June, as revenue was only down 12 percent when compared to the same month a year earlier, according to the company. Revenue from premium users—people who don’t hear ads when listening to music—generated $1.9 billion, up 17 percent year-over-year and 3 percent quarter-over-quarter.
Overall, total revenue from the company was roughly $2.2 billion, up 13 percent year-over-year and up 1.5 percent quarter-over-quarter. The company said it saw improved revenue momentum in the back half of the second quarter that has continued into the third quarter, and expects to hit its full-year targets.
Podcasts see double digit growth
Meanwhile, Ad Studio—Spotify’s self-serve platform—and its Podcast channels saw double-digit growth and exceeded expectations, the company said. Spotify has spent some time building out its programmatic capabilities and audience data to transform its platform with the aim of becoming “the Facebook of audio ads.”
Podcast listeners hear ads regardless of whether they pay the company or not. As a result, the company has been significantly expanding its content offerings with a flurry of recent deals that include “The Joe Rogan Experience” and bringing the entire DC Comics catalogue to its platform. Earlier this month, Omnicom Media Group said it would commit $20 million over the next five months on Spotify podcast ads. The news was significant as the deal committed ad dollars upfront—a practice often reserved for more-traditional channels such as linear TV.
Spotify said 21 percent of its 299 million monthly active users now engages with its podcast content, up from 19 percent in the previous quarter. “Consumption continues to grow at triple digit rates year-over-year,” the company said in its second-quarter earnings release.
Industry-wide podcast ad revenues, meanwhile, are expected to climb to about $813 million this year, a 15 percent upswing over 2019, according to a July report released by the Interactive Advertising Bureau.