Spotify, Amazon Chase Ad Revenue on Divergent Paths

In the subscription economy, Spotify and Amazon are focused on driving ad revenue like there’s no tomorrow.

Spotify this week announced it’s building out its self-serve ad platform, Spotify Ad Studio, with new conversion metrics tools designed to help artists increase listener engagement. The company credited ad-supported revenue for stronger than expected growth in its recent Q1 earnings report.

Meanwhile, Amazon is going all out with a free, ad-supported music tier tied to its Echo smart speakers.

Spotify’s new ad tools give artists more insight to target their ads to the right audience and time.

Artists and labels have been asking Spotify for more conversion metrics to learn, beyond simple click data, what action listeners take after hearing an ad, such as adding it to a playlist.

The new ad tools are the latest of several releases to give artists more targeting control. Enhanced targeting is a centerpiece in Spotify’s advertising expansion plan.

The company has already added Nielsen Brand Effect to its measurement suite enabling advertisers to verify brand awareness for campaigns running on the platform. It says it will also trial an “audience upload” feature, letting advertisers upload their own audience data to reach customers.

Spotify Lauds Ad Revenue in Q1 Earnings

In its recent earnings news release, Spotify credited strong ad revenue performance to an “updated user experience that provided greater consumer control and an increased focus on curation and personalization.”

It also said Spotify Ad Studio is the company’s “fastest growing adverting channel,” which helped achieve a “12% increase in Content Hours per MAU (monthly active users) across the free tier, accelerating growth in ad inventory.”

Table: Spotify Q1 Earnings — Ad-supported Revenue

Total Revenue: €1,511 million; grew 33% Y/Y
Ad-supported Revenue: €126 million; grew 24% Y/Y
Strongest Growth Areas:Measurement and programmatic ad revenues
Measurement-related Revenues:Doubled from 20% to 40% of total ad revenues Y/Y
Programmatic and Self-serve-related Revenues:Grew 53% Y/Y and now account for 26% of total ad-supported Revenue

Amazon Makes Music Free to Echo Users

Amazon’s new free music streaming tier is available to anyone in the U.S. who owns an Amazon Echo speaker and wants to play ad-supported music on it.

The free service is for listeners who have any Alexa-enabled device but don’t have either a Prime membership (and therefore access to Prime Music) or a subscription to Amazon Music Unlimited.

Analysts have been quick to acknowledge Amazon’s smart speaker strategy is playing out well so far. Despite the new service being entirely ad-funded, smart speakers and voice-enabled technology continue to gain acceptance.

A recent study by Adobe, 2019 Voice Report, found that consumers feel voice ads are more engaging and less intrusive than other ad formats.

Spotify Ad Studio: What to Know

  • Self-serve audio ad campaign platform
  • Introduced in 2017; available in the U.S., U.K., Australia and Canada
  • Artists can create a 30 second spot with visual and call to action with a link to any URL
  • Ads are served to Spotify users during ad breaks between songs on both desktop and mobile platforms
  • Advertisers are asked to spend a minimum of $250 in ad budgeting, charging $0.015-$0.025 for each ad served.