Spotify: A goldmine for advertisers

Spotify is one of the most popular apps for streaming music. It lets users listen to continuous music, podcasts and other arts content through its platform. The service is available through mobile phones, computers, tablets, TVs and cars, so users have access to the service anytime, anywhere. The company had 286 million users by the end of March 2020, 131 million of whom were paid subscribers (the majority choose free memberships, supported by ads).

Towards the end of February 2020, with the arrival of COVID-19, Spotify recorded a drop in active users on its platform, mostly in hard-hit countries like Italy. However, a significant rebound has already been observed in recent weeks, with a 31% increase in active users in March 2020 as compared to March 2019. 

Another recent change: an increased interest in news podcasts. This persuaded Spotify to create a COVID-19 hub, which would allow users to find all the information they’re looking for in one place. Yet another behavioural change that’s been noted: users are listening to more relaxing music, in the form of tunes that are more instrumental and with a slower rhythm, during this period of confinement.  

Thanks to streaming intelligence (Spotify’s first-party data), this platform has strong strategic potential for advertisers, and shouldn’t be underestimated.

Spotify Ad Studio offers a variety of ad formats to help brands communicate their messages to the right target audiences. Formats available to advertisers include audio, video, display and sponsorships. 

The Audio Everywhere format gives advertisers the ability to communicate with audiences at any moment of the day, through any device Spotify runs on. Over the course of an active listening session, an audio ad will be played every 15 minutes, between songs.  

Ads run a maximum of 30 seconds, and can be supported by a square display banner driving users to the desired website. 

On the video side, there are two available options: the Sponsored Session and the Video Takeover. The Sponsored Session is an interesting option for brands with strategies focused on brand awareness. It consists of offering audiences 30 minutes of ad-free music, in exchange for watching the advertisers’ video ad and clicking on a display banner (thereby increasing engagement). Video Takeovers are video ads that appear during ad breaks, allowing brands to engage in visual storytelling. This format is also useful for increasing brand or product awareness. 

One example of a brand that used the Video Takeover format successfully is Dunkin’ Donuts, to promote their cold brew coffee. The goal of their one-month Spotify campaign was to generate interest in the product. By communicating their video message to users on desktop and mobile devices, the campaign generated 4 million completed views. According to Spotify, the campaign generated a 65 per cent increase in ad recall and a 25 per cent increase in brand recognition. It also led to a significant increase in viewability compared to previously established benchmarks. 

In terms of display advertising, there are three available formats. First, the Overlay, an ad that displays in full-screen mode to returning users. This immersive display ad is useful in driving traffic to the advertisers’ website. The Homepage Takeover is a 1200 x 270 display banner available only for desktop, that allows an advertiser to display their ad message on the Spotify homepage for 24 hours. Finally, the Leaderboard format, an IAB standard display ad, displays an advertisers’ message for 30 seconds on desktop as well as the Spotify web app. Display advertising is a good complement to audio and visual formats. In addition to being able to generate traffic, it can help with brand recall.

In the sponsorship category, you’ll find Spotify’s Sponsored Playlist ad format. It allows brands to sponsor various playlists created by Spotify, depending on who their target audience is. The brand’s logo appears within the playlist they’ve sponsored. Brands can also communicate audio and video messages during ad breaks, as well as native ads to generate traffic. This format holds a lot of appeal for brands wanting to move forward with multiformat campaigns, and looking to increase brand awareness.  

Spotify’s advertising model relies on the collection of a huge amount of its users’ personal data. First, through the process of opening an account, which is required of any user who wants access to the streaming service. Then, thanks to all the information collected in real time about their listening habits. 

One extremely interesting aspect of Spotify’s first-party data tracking is its interconnectivity. The fact that a user can connect to the platform from their phone, computer or tablet allows Spotify to follow each user’s journey. 

There’s also the question of listening habits, which not only reveal a lot about a user’s personality, but also their moods, tastes, different behaviours in the platform, how they engage with ads, preferred electronic device for listening to music and even what they are doing at a particular moment, according to the playlist they are listening to. The platform refers to this as “streaming intelligence.” 

One example of a brand that’s used streaming intelligence is Gatorade. The goal of their campaign was to build brand awareness for Gatorade among young Hispanic American athletes, as well as consumers between ages 18 and 34. Gatorade opted for a multiformat campaign including audio, mobile display and sponsored sessions, and defined their target audience by their interests. According to Spotify, the campaign generated a 171 per cent increase in ad recall as compared to the benchmark, and the target audience qualified the ads as relevant on Spotify. 

Spotify playlists can also provide marketers with insights as to what activity a user is potentially engaged in. A sports brand like Under Armour might, for example, decide to sponsor a Spotify playlist from the Workout category. 

Thanks to the data it collects, Spotify has successfully identified and categorized five major listening habits that could help companies better target their audiences.

And finally, Spotify has identified various categories of users, be it millennials, early tech adopters or parents. For example, millennial audiences on Spotify might be interesting to a brand like Samsung, because, according to the analysis done by the streaming platform, millennials are “44% more likely to regularly inform friends and family about new products, 64% more likely to buy brands they see advertised, and 90% more likely to have the latest tech products.” A campaign using display, audio and video could then be used to increase brand awareness for Samsung or one of its products, like the Galaxy S20 Ultra.

As a digital media analyst, I believe that many brands would have a lot to gain from using Spotify, and taking advantage of its streaming intelligence and first-party data to reach their target audience throughout the user journey, from awareness to conversion.  That said, so far, ad campaigns on Spotify haven’t enjoyed the same popularity among advertisers as those on Facebook. It’s a great opportunity for brands to have a presence on a less saturated ad platform.

One use case I find particularly inspiring is that of Adidas. By consulting the accelerometers integrated in users’ mobile phones (real-time data), Adidas was able to analyze their cadence while jogging, and exploit this data to find songs with a BPM that corresponded to the intensity of their run. For the first time in many runners’ lives, they weren’t listening to music, the music was listening to them. 

In conclusion, with its streaming intelligence and useful customer journey data, Spotify ad campaigns are a gold mine for marketers looking to reach younger generations.