Audio streaming service Spotify has acquired podcast advertising and publishing platform Megaphone, announcing a $235 million deal this morning that will bolster the company’s focus on audio monetization and simplify the process for third-party podcast producers.
The acquisition comes after the debut of Spotify’s Streaming Ad Insertion, a proprietary technology launched at the beginning of this year that allows podcast producers and advertisers to access key marketing metrics and demographic information including the age, gender and device type of listeners.
“We don’t have any more inventory to sell to hungry advertisers,” Jay Richman, Global Head of Advertising Business & Platform at Spotify, says of Streaming Ad Insertion, which is sold out of ad inventory on its original and exclusive podcast library as of Q3.
Spotify’s technology is also revolutionizing the way podcasts ads are delivered, Richman says, moving away from the traditional method of a show’s host reading a “coupon code or a vanity URL to imprint that on the listener.”
Embedded ads possible
With this deal, the two companies plan to help advertisers “realize the full potential of podcasts,” which will be achieved “through the power of the Megaphone Targeted Marketplace and by making Streaming Ad Insertion available to third-party podcast publishers for the first time,” Spotify says in a statement.
Advertisers across the board will now be able to embed ads in Spotify’s original and exclusive library of podcasts, while scaling reach via Megaphone’s audience-focused Targeted Marketplace platform. Podcast creators will also have the ability to opt in to have their content monetized, “matching their loyal listeners with even greater demand from advertisers,” the company says.
Podcast advertising has caught the attention of many marketers in the past few years, with U.S. podcast producers reporting revenue growth of hundreds of millions of dollars annually as an increasing number of Americans familiarize themselves with the format.
According to the Interactive Advertising Bureau and PwC’s joint Podcast Revenue Report, which was published last year, total podcast ad revenue is on track to surpass $1 billion in 2021. But Richman says he believes the potential for marketing in this space is much greater.
“When I zoom out and look at those industry predictions, I feel like they’re woefully low,” he says, noting that Spotify has shifted its focus from music to audio as a whole to become “equal part content, equal part technology.”
When announcing its third-quarter earnings this year, Spotify revealed that 22% of total monthly average users engaged with podcasts in the previous quarter and the company’s podcast ad revenue was up nearly 100% year-over-year.
Spotify’s acquisition of Megaphone remains subject to standard regulatory approvals.