Spotify sees the future in audio ads but wrestling with monetising premium service

Spotify is riding a resurgence in interest in audio and its global head of audio monetisation wants advertisers along for the ride. But, as Les Hollander admits, the solution is a complex one.

Ask Les Hollander what the future looks like and he pauses, ponders for a minute and then apologises. He know’s it’s there, but he just can’t see it.

les-hollanderWhat he does see, though, is that whatever it is, Spotify will have a hand in it. And advertisers will be along for the ride because the power of music, the product of the industry that was first to feel the impact of digital disruption, will remain all-consuming.

Hollander is Spotify’s global head of audio monetisation, a radio industry veteran having worked at both CBS and Clear Channel before being bitten by the digital bug and finding his way to the streaming giant through a start-up, followed by Pandora.spotify logo

A major area Hollander admits is a challenge for Spotify is understanding how to unlock the value of its premium audiences for marketers without upsetting the people paying for an interruption-free service.

But he said it was impossible to predict how it would evolve.

“Having been on the streaming side for quite a while what I can tell you is in addition to content and the democratisation of content, as well as the ability to listen to that content across multiple devices people come to streaming and come to the premium platform for less or no interruption,” Hollander said.

“So I think its a delicate balance of could you ultimately give some super premium content to someone on the paid platform in return for a marketing message. It’s something we wrestle with but have no plans to change in the immediate future.”

Even so, he sees  advertising as a vital pillar to the business.

“I see the advertising business as a growing business. As we say in the US we are still in the first inning of the game,” he said.

“It’s a business that’s interesting as it’s driven by data, it’s driven by engagement, it’s driven by innovation. We have scale and reach, we have this data and we have targeting. So from the scale and reach perspective the Spotify business is a great business. We have three million monthly uniques according to Commscore from December.

“If you are looking at us alongside broadcasters in the market, we are 20% incremental reach to a normal broadcast buy. 20% incremental reach particularly against adults 18-39 across Australia.

“Broadcast is live and local and still owns the dashboard, whereas streaming, and Spotify in particular, owns all these moments in time. Music is a proxy for behaviour and that behaviour could studying, it could be exercising, it could be a dinner party, getting ready to go out. And we have all this deep data that shows us.

“We have first party data and everybody is a logged-in user so we know what age they are, what gender they are. we know where they are, time of day, device type and often what they are doing.”

spotify-adsOne of the keys to the audience Spotify is offering advertisers is their level of social engagement – indeed Hollander sees Spotify as a platform as on a par with the likes of Facebook.

“Our audience is interesting because it is a very socially engaged audience,” he said.

“Many of our listeners share their music information on social media. So in addition to that what we found in research is they are more apt to to use social media to express their views on particular brands and use that social media top research those brands over different sites and thus are wi9ing to spend a little bit more and then ultimately advocate for those brands.

“If you put all of this together in a nice package it’s compelling for an advertiser.”

Hollander said that the industry was also seeing an evolution in the advertising model as the user base became more entrenched.

“It will change as different demographics age in and age out of media,” he said.

“If you spoke to a 22 or 23-year-old right now in Australia or across the globe the first inclination to get a piece of news, the weather report o find out a a sports score ‘or listen to music is really to go to a digital device. They are not as inclined to pick up a newspaper or turn on the TV or the radio like they have in the  past. The story will continue to evolve. All those legacy media will continue to be important and have a place in everybody’s daily lives but I think the positions change for everybody and thus our messaging will change and evolve.

trading-playlistPodcasting and more importantly video, are now also a key part of the platform, with Spotify having launched a shareable playlist video series, Trading Playlists, featuring NFL starts in the US – a campaign that ironically coincided with Twitter becoming a broadcast platform for the first time in the US carrying live NFL games.

He said that video for the audio company became important as more marketers became interested in video because consumers were streaming and time-shifting video more.

Spotify’s Sponsored Sessions, which exchange a short video ad at the beginning of a set for 30 minutes of free music, was a prime example of how the platform was evolving.

“Video becomes more important. Audio will always be the meat and potatoes for Spotify, but video will continue to become more important,” he said.

With Spotify’s premium users paying for an ad free experiences along with greater functionality, he said it was impossible to be predict how it would evolve.

Hollander said that the recent demise of Guvera in Australia was  a negative for the industry as a whole as the more players there were, the more attention that would be drawn to streaming overall at a time when it was still trying to get get a foothold.

“The message that is sends is that it is a difficult business in terms of turning a profit but nevertheless has the potential to be a business that will last,” he said.

“We’d like there to be more players rather than less players in the space.”

One the things ‘Hollander said is most satisfying is the important role that audio was increasingly playing in people’s lives in the digital age.

“There is a resurgence for the audio ad product and audio overall. With the advent of people getting so much information through their mobile phones and connected consumer devices and the way the dashboard is evolving audio and audio advertising is actually being reborn.

“What will become more important in the future is better creative, data-driven creative, shorter and more succinct messaging, better targeting, innovation through voice activation and that is very gratifying.


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