Today in Digital Marketing - SPECIAL: How Spotify is Changing the Podcast Ad Industry

Episode Date: October 30, 2020

In this special extended episode, Brian Barlatta from the Sounds Profitable newsletter discusses how the ad industry is being forced to adapt with Spotify's changes to podcast tech.Subscribe free to Sounds Profitable at SoundsProfitable.com➡ Join our free Slack community! TodayInDigital.com/slackHELP SPREAD THE WORD:Tweet It: bit.ly/tweet-tidm to preview a tweet you can publishReview Us: RateThisPodcast.com/today ABOUT THE PODCAST:Advertising: RedCircle.com/brands and TodayInDigital.com/adsClassified Ads: TodayInDigital.com/classifieds Leave a voicemail at TodayInDigital.com/voicemailTranscripts: See each episode at TodayInDigital.com Source links and full transcripts: TodayInDigital.com Email list: TodayInDigital.com/email Theme music: Mark Blevis (all other music licensed by Source Audio)TOD’S SOCIAL MEDIA:Twitter: twitter.com/todmaffinLinkedIn: linkedin.com/in/todmaffinTod’s agency: engageQ.comTikTok: /tiktok.com/@todmaffinTwitch: twitch.tv/todmaffin (game livestreaming)Today in Digital Marketing is produced by engageQ.com Our Sponsors:* Check out Kinsta: https://kinsta.comPrivacy & Opt-Out: https://redcircle.com/privacy

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starting at $19 per month at zensurance.com. Be protected. Be Zen. the podcast space. This is worth a listen, even if you're not actually marketing a podcast. Brian wrote about this in his excellent newsletter called Sounds Profitable. It's all about the ad technology in podcasting. So from analytics to dynamic ad insertion, and he puts it out every Monday morning. Check it out at soundsprofitable.com or talk to Brian yourself. He's in our Slack community. Check the link in this episode's notes. Okay, so Spotify is streaming podcasts.

That in itself is pretty new to the podcast world since the technology started as audio file attachments in RSS feeds. In other words, downloads, not streams. But since they're delivering it via streaming, they can do some pretty clever things with their technology, which is great for their millions of users, but is it good for the podcasting industry as a whole? Here's Brian. Let me paint you a picture of the future. Spotify won the podcasting wars.

As the podcasting industry struggled to find cohesion amongst its myriad service providers who failed to follow the coopetition framework presented in the early days, Spotify gobbled up most of the podcast listening audience. Once enough listeners had been lured in with the promise of better discovery, more robust features, and exclusive content, the big publishers followed. Reluctantly at first, but in-app advertising options and listener interaction features made them more confident about the change. And when the big publishers were able to provide their advertising partners incredibly rich app-level data about their ad performance that proved unquestionably the efficacy of

every dollar spent, there was no going back. Some of the hosting providers who survived banded together as resistance fighters, providing a space for people to start and run their own podcasts free of the perception of evil and safe from the prying eyes of faceless corporations exploiting the very ear holes of their listeners. But with the pull of robust features like in-app style monetization, ease of use, and new formats not possible under the old ways, Spotify continued to siphon off once-ardent holdouts, dwindling the resistance's numbers. Just like the elves left Middle Earth, with no need for direct relationships with individual podcasters and ever-increasing

treasure chambers, podcast-specific ad networks and ad-ref firms were never heard from again. Legends say that the analytics and attributions partners hid deep underground. On quiet nights in Q4, if you listen very closely, you can almost make out the sounds of account dwellers walking imaginary clients through Lyft reports. The final, epic battle between Spotify and the RSS feed was a bloodbath. The RSS feed was greatly outnumbered. Few shows paid much attention to their still extant but rarely accessed feeds now that Spotify was hosting and serving all of their audio content. Far in the distance and safe from the carnage, the IAB chuckled to themselves and congratulated Spotify on another flawless victory. In a cruel twist, listeners continued to pay $12.99

a month for the Spotify premium ad-free experience, yet still we're plagued by podcast ads. Back to the future. Spotify's slate of feature releases this year have made one thing absolutely clear for every company in the podcast advertising space. They don't just want our sandwich, they want to own the whole lunchbox and probably rent it back to us. Credit where credit's due. Spotify is responsible for growing awareness of podcasting substantially. A large global marketing effort and nearly 300 million active users to their platform has helped them grow fast into a comfortable number two slot behind Apple.

Earlier this year, Spotify announced their streaming ad insertion product. SAI works by inserting an ad into the stream in real time. I can hear all of you saying, dynamic ad insertion was bad enough. Now you're talking about real time streaming so they can decide what the ad is just as it's about to play? Fantasy. That's not possible in podcast advertising. And you're right, it's not.

While the rest of the podcast ad tech space is limited to using IP address and user agent to insert an ad as it's being served from the podcast hosting company, Spotify takes full advantage of the fact that they're not bound by the same rules as the podcast advertising space. They're able to treat podcast ads like streaming ads,

bypassing the limitation of the rest of the industry. And interestingly enough, bypassing the complaints by many advertisers that ad impression tracking and podcasting falls short of their needs. Spotify's unique offering to advertisers goes even further with their in-app offers product, which provides the click metric that so many sophisticated advertisers in other spaces rely on as a key campaign success metric. Outside of this offering, no podcast advertiser has the ability to get click data for their campaigns. But that's the goal, right? The entire podcast advertising industry is trying to make the space appealing for digital display, video, and social-focused advertisers to

spend in podcasting. The more companies pouring money into podcast advertising, the bigger the space becomes. Spotify is clearly helping accomplish that goal. Six months after they launched SAI, Spotify signed a $20 million advertising deal with Omnicom Media Group for just the second half of 2020. Today, Spotify's reach isn't big enough to keep advertisers from exploring other avenues in podcast advertising, so every advertiser they bring in positively helps the industry. But Spotify isn't done expanding their reach in podcasting or streaming audio. How will that change podcasting?

Currently, Spotify's unique ad offerings are only served to listeners of music on their free plan, or on the podcast Spotify owns and operates. But there's nothing stopping them from providing access to their marketplace for any publisher that wants it, giving anyone the ability to command a higher CPM for their inventory over what programmatic open marketplaces currently can offer. Why stop there? Imagine Spotify expanding that offering for publishers' direct sold campaigns as well. Today's focus is on Spotify buying big-name shows and making them exclusive. But if Spotify has a large enough audience, provides better monetization tools for the inventory run courtesy of their app, and are actively courting advertisers to spend big across the Spotify platform,

do they really need to keep buying shows and making them exclusive? Wouldn't most publishers want to at least sell all of their Spotify plays through Spotify's in-app advertising and all non-Spotify downloads through dynamic ad insertion? Or maybe there's a point where podcasters find it not financially worth it to bother with ads for non-Spotify listeners, so the podcast decides to go exclusive, helping further increase Spotify's market share. Do you have business insurance? If not, how would you pay to recover from a cyber attack, fire damage, theft, or a lawsuit? No business or profession is risk-free. Without insurance, your assets are at risk from major financial losses, data breaches, and natural disasters.

Get customized coverage today starting at $19 per month at zensurance.com. Be protected. Be Zen. But it's not just cool ad tech features that will win these publishers over. Spotify launched interactive polls, letting show hosts engage directly with their audience. Good luck on getting any other major podcast listing app to do that. Even if they did, what a fragmented mess it would be to piece that together between all the other apps. Clawing back any semblance of ownership of that relationship would be a big win for most show hosts. After all, every podcast player has far more information than any hosting provider or publisher. Last week, Spotify announced the ability for creators to submit shows with music using the full track of songs from Spotify's extensive library with narration from the host between the tracks.

These shows with music are only accessible through Spotify's app, not even the web player, and require a subscription to Spotify Premium to hear the full song. Purists will say it's not really a podcast if it's not distributed by RSS feed, and Spotify is being careful to call these shows with music, not podcasts. But to listeners and advertisers, it's a podcast. A podcast using full tracks of commercial music without violating copyright. If you want to hear about how cool this feature is, because it is cool from a listener and creator perspective, Tom Webster and Evo Terra are far better explaining the value there. The creators can monetize their content with the host-read Anchor sponsorships or their own ads if they want to, subject to

Spotify's rules. Anyone can use Spotify's free creation tool, Anchor.fm, to create their own music podcast, sorry, shows with music. So it's not a stretch to think that Spotify will expand the ad capabilities on these shows from just Anchor sponsorships to full-blown SAI, multiplying their podcast inventory within months of the change. I'm hard-pressed to believe that the most popular music playlist creators on Spotify won't migrate over to this feature to take advantage of the monetization aspect and to keep better connected with their fans by publishing regular episodes of new curated playlists. You know, like podcasters. Will an advertiser honestly care if the host or announcer read ad is inserted into a show with music instead of a traditional podcast? Or will their focus be on what offering provides them the most similar experience to buying in

other ad platforms? And when the listeners yell, why am I hearing ads? I pay for premium. Spotify will remind them that it's a podcast, a show with music, blending the two products together to convince advertisers that an engaged streaming audio listener and a podcast listener are the same, laughing all the way to the bank. Last week, I advocated for publishers, hosting providers, and analytic and attribution companies to come together to create and present a consent framework to present to the podcast players. We have an opportunity not just to get ahead of the curve for listeners, but for advertisers who are looking to the podcast industry for how to safely and legally navigate towards success.

The underlying message of that piece and this one are the same. The podcasting space lacks representation and negotiating power because of the fragmentation. More than ever, companies in each category need to band together to affect positive change and hold their ground. Regardless of category, hosting, analytics, and attribution, the harsh reality is everyone on this side of the industry is working with the exact same incoming data. The second best thing that Sean Creeley of PodSize has ever said to me was, there's no counting downloads better. What makes each company unique is what they do with that data. The idea that collaborating with a competitor and setting standards for your vertical could somehow negatively hurt your business or allow a competitor to steal a feature is laughable. Most companies have a laundry list of client

feature requests and tech debt they're trying to get through, on top of their extensively planned roadmaps. Besides, your competitors already have logins to your platform, your sales deck, and rate cards through mutual clients. By not working together, we allow companies that already own the entire stack, like Spotify, to become our biggest competitor overnight. What Spotify offers that others cannot is very attractive and very lucrative. There are definitely many publishers and advertisers who could benefit from Spotify offering the services predicted above. But if my apocalyptic vision comes to light, a substantial chunk of the podcasting industry won't exist anymore,

unless we choose to focus on two things. One, podcast listeners are different from music listeners. And two, host-read ads perform better than announcer-read ads. Once we learn to collaborate, we can start asking more from the podcast players to help us prevent that potential future. I'm Brian Barletta of Sounds Profitable, a weekly podcasting ad tech newsletter, part of the Pod News Network. Thank you for listening, and I hope you'll consider subscribing to my newsletter.