Spotify’s programmatic ad revenue nearly doubled YOY last quarter, and almost half of all impressions sold on the service in 2017 were bought programmatically, accounting for 18 percent of its total ad revenue that year. Spotify was the first music streaming service to offer programmatic ad sale capabilities back in 2016 through partners like AppNexus and Rubicon Project, and the company acqui-hired content recommendation startup MightyTV in March 2017 to oversee its programmatic efforts. One of the tightest races between Spotify and Pandora in ad-tech centers around programmatic advertising, or the algorithmic purchase and sale of ad space in real time. As long as you prove the ROI on your marketing, we’ll spend more and more money on it,'” said Lynch. “I’m telling, ‘You have an unlimited marketing budget. At Music Biz, Lynch discussed how one of his higher-level priorities for Pandora was embracing a more data-driven marketing strategy and investing more heavily in teams with ad-tech expertise - working closely on the cause with new CMO Aimée Lapic, whom the company hired in Dec. The one area where Pandora might be outpacing Spotify: advertising and marketing tech. After winding down operations in Australia and New Zealand in June 2017, Pandora remains a U.S.-only service - arguably one of its biggest obstacles to continued growth against the competition. In comparison, Pandora’s ad-supported revenue grew by around 4 percent YOY, from $223.3 million in Q1 2017 to $214.6 million in Q1 2018, perhaps signaling the saturation of the ad-supported music streaming market in the U.S. This gap makes sense in the context of Spotify’s continued global expansion, particularly into territories across Asia, Africa and Latin America where ad-supported experiences remain the dominant norm for digital music consumption. Spotify can’t afford to ignore them, either: the company’s ad-supported revenue is growing more quickly than its Premium revenue, at 38 percent versus 25 percent growth YOY in Q1 2018, respectively. “Artists can’t afford to ignore that audience.” “There are millions of music fans who can’t afford $9.99 a month, but that doesn’t mean they aren’t music fans,” Carter said at a press conference in New York last month. Both Spotify and Pandora cite this latter benefit in investor presentations in an effort to convince industry bigwigs that investing more in free-streaming audiences - and migrating them away from terrestrial incumbents - may be more profitable, not less, in the long run. Not only does each of these services have a much larger free audience than any given radio outfit, but artists and labels also get a cut of ad revenue from streaming, in contrast to being left in the dark financially by traditional radio spins (at least in the U.S.). Spotify Launches New Video Series Teaching Artists How to Better Use Platform, Navigate Music… “But that’s a ratio that I think will flip over the next decade.” It’s no coincidence that the New York Stock Exchange categorizes Spotify and Pandora as members of the “Broadcasting – Radio” industry. Spotify’s global head of creator services Troy Carter recently called the company’s ad-supported tier “the biggest radio station in the world.” Lynch shared a more realistic take on Pandora’s positioning: “Despite the fact that we’re the largest streaming service in the U.S., we’re only 10 percent of the listening that happens on terrestrial radio,” he admitted. Interestingly, both Spotify and Pandora see their free offerings as direct competitors to terrestrial radio. “There’s still a tremendous amount of growth to happen within free.” “It’s an acknowledgement that there is an opportunity to develop a significant business with consumers who will not pay for subscriptions,” he said to a packed audience at the Omni Hotel. The chief exec interpreted Spotify’s focus on free as a boon for all streaming services across the ecosystem, including his own. Yet, speaking at the Music Biz conference in Nashville on May 16, Pandora CEO Roger Lynch seemed unfazed. In contrast, Spotify grew its own user base by 30 percent over the same time period, and now has 13 times more paying subscribers and 2.4 times more active listeners overall than Pandora on a global level. Plus, Pandora’s total listener base and consumption time actually decreased by 6 percent and 5 percent year-over-year in Q1 2018, respectively. with 72.3 million monthly active listeners, 92 percent of whom are ad-supported - this move may cause concern that Spotify will poach more of Pandora’s users who are seeking a more on-demand listening experience without shelling out additional money. In April 2018, Spotify revamped its mobile ad-supported experience, allowing its free users to listen to any track in their top fifteen Spotify-curated playlists completely on-demand on their mobile devices.įor Pandora - one of the oldest and largest music streaming services in the U.S.
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