Spotify is now exploring new opportunities in the video advertising space, aiming to make it simpler for brands to execute multi-media campaigns on its platform.
While not a social media platform in the traditional sense, Spotify is focusing on enhancing connections and community interactions between fans and artists.
According to Alex Brownsell, Head of Content at WARC Media and the report’s author, “Spotify is extending beyond its audio-centric origins by targeting the video ad market, particularly as video podcast consumption continues to rise.”
Brownsell notes that Spotify’s recent investments in original podcast content and monetization tools are now being redirected towards ensuring that growing ad revenue translates into increased profitability for the business.
The latest Platform Insights report from WARC Media provides data-driven insights into Spotify’s challenges and opportunities. It highlights critical data points for advertisers, covering aspects such as investment, user consumption, and platform performance.
Investment: Spotify’s advertising revenue is projected to reach $2.1 billion in 2024, marking a 13% year-on-year increase, and is expected to grow to $2.6 billion by 2026.
The platform has shown consistent momentum in advertising revenue growth, achieving double-digit increases over the last six quarters. WARC Media predicts Spotify’s global ad revenue will surpass $2 billion for the first time in 2024. Podcast advertising, in particular, has seen stronger growth compared to music advertising, driven by increased impressions from both original and licensed content through the Spotify Audience Network. The platform is also exploring generative AI tools, such as Quick Audio, to further boost ad revenue.
Spotify is also focusing on enhancing its social capabilities, introducing features like podcast comments and options for users to share their listening habits.
Brands in sectors like financial services and automotive are leveraging Spotify to reach younger audiences. WARC Media’s analysis indicates that financial services will be the third highest spending category on Spotify in 2024, with an estimated $339.4 million in investment. Additionally, 61% of first-time car buyers on Spotify are under 35, according to GWI.
Consumption: With over 626 million users worldwide, Spotify remains the leading audio streaming subscription service. While growth has stabilized in North America, significant user increases have been seen in regions like the Middle East, Africa, and Asia, which accounted for 205 million users in Q2 2024, up from 165 million the previous year.
Spotify reports that over 319 million Gen Z users are actively engaging with its immersive features, with in-app video being a key area of focus. The platform has seen an 81% year-on-year rise in video streaming among Gen Z, who also represent 57% of Spotify’s audiobook audience and are more likely to use the ‘AI DJ’ feature introduced last year.
To support fan engagement, Spotify is adding features like podcast comments and making it easier for artists to share content. This, in turn, enables brands to better connect with communities on the platform.
User engagement patterns vary throughout the day, with audio podcast consumption peaking in the morning, music streaming increasing around midday, and video podcast viewing more prevalent at night.
In response to YouTube’s expanding presence in the podcast sector, Spotify is positioning itself as more than just an audio platform. The company has observed a 44% year-on-year increase in video streams over the past 18 months, largely driven by Gen Z, who have increased their time spent watching videos on Spotify by 136% year-on-year.
However, preferences for video podcast consumption vary by region. A YouGov study found that about a quarter of US adults prefer watching video podcasts, while this figure drops to around 13% in the UK.
Performance: Combining video and audio advertising on Spotify has been shown to increase sales by 66% and purchase intent by 27%, according to Spotify’s data.
The platform claims it can achieve a 27% higher average incremental unique weekly reach compared to commercial TV channels, and a 22% higher reach compared to social platforms.
Spotify asserts that audio streaming can significantly influence shopping behavior, as the platform is integrated into users’ daily routines at multiple points throughout the customer journey.
The effectiveness of attention in audio advertising is still being studied, but Spotify’s video ads are already averaging 58% above Adelaide’s attention benchmark for online video, surpassing platforms like TikTok, Instagram, and Snapchat.
