The last three months were Spotify‘s most profitable quarter ever, but despite that, it saw a drop in ad sales growth–and ad revenue overall still makes up just 12% of the platform’s total earnings, well below its desired benchmark of 20%.
To boost that figure, Spotify is reportedly pitching advertisers hard on video podcast ads, setting itself up as a competitor for both YouTube and network TV.
A 50-page pitch deck acquired by Business Insider shows Spotify setting itself as the place to run video ads. Its podcast library now has more than 250,000 shows with video content, and 70% of users who watch those shows watch them with video playing in the foreground of their devices, Spotify says in the deck. Users also tend to spend a not-insignificant 50 minutes per day consuming podcasts.
Subscribe for daily Tubefilter Top Stories
As a result, “Our video ads are only served to your audience when we know they’re engaged with the app and looking at the screen,” it says. On top of that, video ads are non-skippable and sound-on. That’s a contrast to most ads on, say, YouTube, which can generally be skipped after a certain period of time—or, even if they aren’t skippable, can be otherwise muted.
This contributes to Spotify’s ads capturing a higher-than-usual amount of users’ attention. It points to a study from media measurement firm Adelaide that says Spotify video ads capture more attention than ads on TikTok, Instagram, Reddit, Facebook, Pinterest, Snapchat, LinkedIn, and X. (Again, notice YouTube isn’t on that list, because it’s the primary purveyor of video ads on social media.)
Not only is Spotify going after other content platforms, it’s also going after traditional TV networks. Much like YouTube, it’s pitching itself as a competitor for ad dollars that would normally be spent on television, pointing to Nielsen data that says its video ads can reach 27% more consumers than ads run on TV.
“Brand new podcast buyers, on average, saw a 91% incremental lift in reach their first time buying on the US Spotify Audience Network,” it says in one slide.
Its video ads also ramp things up beyond reach, Spotify says. Combining both video and audio ads increases purchases intent by 27% and incremental sales by 66%, with a 34% higher conversion rate than audio ads alone.
Basically, Spotify really wants more video ads. We can see why: in addition to shaping it into more of a challenger for YouTube (which we know it has an eye on, since it often poaches podcasters from YouTube and signs them for exclusive deals), video ads are typically more expensive for brands to run than audio ads, which means Spotify can charge higher rates for video ad placement, getting it closer to that 20% of total revenue.
As Business Insider points out, all this pitching likely won’t move Spotify up in the grand scheme of ad revenue earners. It’s predicted to earn $2.06 billion in ad revenue for all of 2024; for comparison, YouTube earned $31.51 billion in ad revenue in 2023, and made $8.66 billion this past quarter alone.
