Despite impressive overall results for Spotify last quarter, the platform experienced a slowdown in its ad sales growth. Currently, Advertising revenue accounts for only 12% of its total revenues, a figure that is far from its strategic target of 20%. To close this gap, Spotify has launched an ambitious strategy that includes a strong promotion of the video ads for podcasts.
Spotify has identified a huge opportunity in video advertising, seeing this modality as a way to attract more advertisers and increase its advertising revenue. According to a 50-page document obtained by Business Insiderthe platform is presented as the ideal space for video advertising within the podcast ecosystem. Spotify has significantly increased its podcast library with video content, which now has more than 100,000 subscribers. 250,000 programs. In addition, 70% of users who access this content do so with the close-up video their devices, ensuring they are truly engaged and paying attention to the screen.
This level of engagement has been a key element in Spotify’s strategy. Unlike other platforms like YouTubewhere many ads can be skipped or muted after a few seconds, video ads on Spotify cannot be skipped and always play with sound. This ensures greater attention-grabbing by users, an essential factor for advertisers. According to a study by media measurement firm Adelaide, Spotify’s video ads capture more attention than those on platforms like TikTok, Instagram, Reddit, Facebook, Pinterest, Snapchat, LinkedIn y X.
Spotify is not only competing with digital platforms, but also with the conventional televisionIn its quest to attract advertisers who traditionally spend on television, the company has pointed to Nielsen studies that indicate that its video ads can reach 27% more consumers than TV adsThis represents a significant opportunity to capture a larger portion of the advertising budget allocated to traditional media.
The platform also highlights the positive impact of its video ads in combination with audio ads. Spotify claims that this combination not only increases reach, but also increases purchase intention by 27% and incremental sales by 66%. The conversion rate of video ads combined with audio is 34% higher than that of audio-only ads, underlining the effectiveness of this integrated strategy.
From a financial standpoint, Spotify is clear about its motivations. Video ads are typically more expensive than audio ads, which would allow the platform to charge higher fees for the placement of these ads and ultimately approach its goal of 20% of total revenue from advertising. In addition, by positioning itself as a stronger competitor to YouTube, Spotify has been signing exclusive deals with popular podcasters who previously worked on YouTube, consolidating its presence in this market.
Despite these efforts, Business Insider notes that all this promotion is unlikely to have a significant impact on Spotify’s overall advertising revenue picture. The platform is estimated to generate $2.06 billion in advertising revenue in 2024, a figure that, while considerable, remains far behind the $31.51 billion that YouTube earned in advertising revenue by 2023.
