Spotify’s advertising business booming due to podcasts –

Spotify’s advertising business booming due to podcasts –

Two-Sided Marketplace

Podcasting isn’t the only reason for Spotify’s advertising growth. The company has also convinced record labels to pay to put their songs in front of certain listeners using an array of tools. Spotify dubs this business the two-sided marketplace.

Advertising had been an afterthought at Spotify for many years. The music streaming app used the free version of its service as a funnel to convert people into paying customers. But its interest in advertising has surged recently. The company is targeting billions of dollars in marketing budgets that currently go to linear radio. The majority of audio advertising dollars is still being spent on traditional mediums.

For Spotify to draw more of that advertising money, it will need to continue growing. The company’s user growth had slowed in the first half of the year, which Ek blamed on the pandemic. Ek said Thursday that the choppiness of the year’s first half was over, and the company forecast it will surpass 400 million users by the end of 2021.

Asian markets are driving a lot of Spotify’s user growth. The company added 16 million users in the quarter, seven million of whom are paying subscribers. The company said it performed better than expected in South Korea, Pakistan, Bangladesh, Indonesia and the Philippines. To help satisfy those listeners, Spotify is also investing more in international podcasts. The company released 76 original and exclusive podcasts from outside the U.S., compared to just 32 in the U.S.

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—Bloomberg News