Marketing Week Article: Advertising on Spotify

Original article by Charlotte Rogers in Marketing Week – here is the original

Today Spotify will embark on one of the most hotly anticipated initial public offerings (IPOs) since Twitter went public in 2013 and Snapchat started selling shares back.

The Swedish streaming service has taken an unconventional approach, opting for a direct listing which circumvents the cost of an IPO by simply enabling existing shares to be traded on the New York Stock Exchange.

The chance to buy shares in Spotify is likely to prove extremely popular with investors. Globally the streaming service has amassed 71 million premium subscribers, up 46% year on year, and 157 million active users, an increase of 28% since 2016.

The average customer spends 25 hours a month streaming music on Spotify. Spanning 65 markets, Spotify’s audience has, to date, created two billion playlists from a library of more than 35 million songs.

Europe is the company’s largest market with 58 million monthly active users, accounting for 37% of its total audience. Spotify claimed a 42% share of the global streaming market in 2016, boasting a 95% share in Sweden, 59% in the UK and 41% in the US.

The streaming service has a dual subscriptions and advertising business model. Premium subscriptions accounted for 90% of Spotify’s total revenue in 2017, according to documents filed with the US Securities and Exchange Commission on 23 March, in preparation for the IPO.

“It’s almost a return of radio-like thinking because brands now have to have their own unique sound.’
Neil Shah, Smirnoff

Last year premium subscriptions delivered €3.7bn (£3.2bn) in revenue, up from €2.7bn (£2.4bn) in 2016, dwarfing the ad supported side of the business, which generated €416m (£365m) in 2017. Its ad business did make a profit of €43m (£38m) for the first time last year, however, after making a loss of €35m (£31m) the previous year.

Spotify has approximately 90 million ad supported users, typically aged between 18 to 34, who are given limited, shuffle-only access to the platform’s full catalogue. Brands serve display, audio and video advertising to these listeners, delivered through impressions.

Despite being a far smaller element of the business, Spotify’s advertising arm has increased revenues by 41% since 2016, prompting the streaming giant to describe it as a “strong and viable” element of the business with “considerable long-term opportunity for growth”

To explore the possibilities of enhancing its ad revenue, Spotify is working on a number of different formats, including podcast partnerships with publishers like Buzzfeed, sponsored playlists and self-serve advertising platforms, as well as trialling skippable audio ads and finding new ways to use programmatic.

In March, Spotify revealed its first ever 3D audiovisual advert, created in collaboration with film company Lionsgate UK to promote the release of horror film Ghost Stories.

Audio from the original trailer was re-purposed to give a 3D audio effect on top of the existing trailer, creating an immersive experience. In the first week of release the 3D ad received click-through rates up 50% from benchmark level, according to Spotify stats.

Last month the streaming giant also rolled out its self-service Ad Studio feature to the UK, which allows brands to create their own adverts within the platform.

The advertiser picks its audience based on age, gender, location, activity and musical taste, selecting whether to opt for mobile, desktop or both. They then set the budget and campaign dates, and use Spotify insights to track the campaign’s success.

Spotify managing director of sales for Europe, Marco Bertozzi, believes Ad Studio will open the possibility for smaller advertisers to get involved on the platform.

“I think at the moment we tend towards working with big clients and agencies,” he explains.

“Ad Studio is going to allow us to open up a whole raft of new, potentially smaller advertisers, who will be able to log in individually and build their own campaigns.”

Spotify is also keen to take on mainstream radio. The streamer believes it can differentiate itself from radio’s “linear model” by offering personalised experiences based on real-time insights into listeners’ behaviour across a variety of devices from smartphones and desktops, to car audio, games consoles and in-home devices.

This all plays into a resurgent interest in audio seen over the past year, as advertisers begin work on defining the sound of their brand, Bertozzi explains.

“With Spotify we have the intimacy that radio has always delivered, but because we can apply the data and insight it’s really important that that creative message matches those moments adequately.

“If you just get a jarring radio ad you’re probably missing an opportunity. Think about the creative and how it sounds to someone in that intimate moment. It’s vital you tailor your message.”

This opinion is shared by Cristina Sarraille, senior strategist at media agency We Are Social, who believes brands need to start thinking about how their brand sounds and what position this occupies in the wider cultural landscape.

“We got into this area over the past few years of sound blindness, where everyone was so excited to think about narratives around images and text, ignoring the use of sound in the way we communicate about the brand,” she argues.

“An agency may say, ‘let’s work with Spotify’. But the brand and the agency should step back and say hold on, do we have a sound for our brand? Do we actually understand the music ecosystem of the culture where our brand is supposed to be playing in order for consumers to identify that sound with our brand?”

Data making a difference

Streaming intelligence data gathered on the moods, preferences and listening habits of Spotify’s 157 million active users is being harnessed by brands to build engaging campaigns. Bertozzi claims the company’s number one priority is respecting its listeners’ data.

“This is our only business model. That app and the music that comes out of it is everything for us, so making sure that that relationship is not disrupted is really important. We have 100% logged in users, so we have a direct relationship with them. All media is on our platform, so those relationships are tightly controlled,” Bertozzi explains.

“A lot of advertisers want our data and they want to put it in data warehouses, we just don’t do that. Our message to advertisers is that we’ve got loads of great ways that you can use this streaming intelligence, but it has to be respectful to our users and it has to be on our platform.”

A recent example of a brand utilising streaming intelligence to share an important social message is the collaboration between Spotify and vodka brand Smirnoff.

Based on Spotify data, which revealed none of the top 10 tracks streamed in 2017 were performed be female artists or bands, Smirnoff decided to redress the balance in time for International Women’s Day 2018 with the launch of the ‘Smirnoff Equalizer’.

The tool provides users with a percentage breakdown of the number of male and female artists they have listened to over the past six months, allowing them opt for an “equalised” playlist that balances it out with female artists personalised to their musical tastes.

Neil Shah, Smirnoff global senior brand manager, describes the campaign as a great example of a brand being clear on its purpose and then leveraging it to have a positive impact on society by delivering something interesting to consumers in a personalised way.

The ‘Equalizer’ tool plays into the way Spotify’s business model works by rewarding artists who attract more streams and bigger fan bases with greater exposure.

The campaign’s core KPIs were to raise awareness of the gender bias in music and enable users to take action. Shah’s team measured the number of visits to the Smirnoff Equalizer platform, paid impressions and earned reach. It also analysed whether listeners were generating and sharing their own playlists, as well as reviewing how overall listening statistics were being affected by the campaign.

With the rise of voice search, Alexa and audio-based platforms like Spotify, Shah believes that marketers will increasingly need to think beyond just their brand’s tone of voice.

Going ‘all in on music as a platform’ has enabled Bacardi to drive real results with its paid strategy.
Fabio Ruffet, Bacardi Europe
“It’s almost a return of radio-like thinking because brands now have to have their own unique sound,” he explains.

“With partnerships like Spotify, where the opportunity exists to interact with consumers in a meaningful and personalised way, it’s important that you have something relevant and interesting to say, otherwise essentially you’re going to be a brand that’s interrupting a user’s listening experience, rather than enriching it. I fundamentally believe brands don’t have the right to do that.”

Artist collaborations

Brands are also finding new routes to connect with listeners on Spotify by linking up with high profile artists.

Making the Spotify environment shoppable is a focus for merchandise specialist Merchbar, which enables artists to bring product listings to their Spotify profile pages. Merchbar recently partnered with beauty company Pat McGrath Labs and US popstar Maggie Lindemann to sell cosmetics from directly from the singer’s Spotify artist page, an industry first.

Merchbar founder and CEO, Edward Aten, explains that Spotify offered the perfect opportunity to take the collaboration between Pat McGrath Labs and Lindemann beyond traditional distribution channels and reach fans in new ways. He believes tie-ups between brands, artists and commercial partners will be the future method to make Spotify shoppable.

“Artists are the most influential group of people in the world, so whether it is through their own merchandise or branded collaborations there is tremendous possibility,” he claims.

“The best part is that as the channels and opportunities keep growing, it’s a huge win for everyone involved – something that’s super rare in the music industry. At the end of the day, you have to start with something that is truly authentic to the artist and resonates deeply with their fans.”

Last year when rum brand Bacardi wanted to change the way emerging Caribbean artists were being represented in the music industry it teamed up with DJ collective Major Lazer on the ‘Music Liberates Music’ project.

The campaign centred on ‘The Sound of Rum’, a Spotify playlist of songs from up-and-coming Caribbean artists, supported by a track from project ambassadors Major Lazer. Every time fans streamed Major Lazer’s track ‘Front of the Line’ and listened to ‘The Sound of Rum’ playlist Bacardi donated studio time to the emerging artists.

 

Major Lazer’s song ended up being streamed 4.6 million times, contributing to 127 hours of studio time for the Caribbean acts. According Fabio Ruffet, creative excellence director for Bacardi Europe, this activity also boosted brand affinity, made listeners more likely to view Bacardi as a “relevant brand” and reinforced the brand’s credibility in being associated with this category of music.

Ruffet believes that going “all in on music as a platform” has enabled Bacardi to drive real results with its paid strategy.

“We have been able to target the right audience at the same time as leveraging our key artist relationship with Major Lazer in an innovative way and giving up-and-coming Caribbean artists a chance to share their music with the world. We had multiple media touchpoints from casual fans all the way down to hardcore EDM [electronic dance music] lovers.”

Data from Bacardi’s ‘Sound of Rum’ playlist reveals that Fridays and Saturdays were the peak days for streaming, with Afrobeat, Dancehall and Crunk standing out as the most popular genres.

Bacardi used similar insight when devising its branded moments campaign on Spotify in 2016. When the brand saw its audience was listening to its party playlists, Bacardi rewarded listeners with 30 minutes of uninterrupted music in exchange for watching a short video. The brand also served mobile overlay ads providing drinks recipes for them to try.

Ruffet advises brands looking to carve out a space on Spotify to leverage data to unlock consumer insights and never forget to get the basics right first.

“Be open to new opportunities, but start with the basics – standard products are proven to drive business results, so it’s important to leverage them to their best,” he suggests.

“Customise. Creative should fit people, platform and a moment in time. And listen to your partner, they know the platform, so can save you from making simple mistakes.”

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Speakrs4schools. Best part of my job!

Well today was all about Speakrs4schools. For those are not aware, it is an organisation set up by Robert Peston to help kids in state schools be inspired by people coming into their schools and talking about their journey and advice on how to  approach the daunting prospect of a) having the ambition to go for their dreams and b) getting into work. 

The organisation has had speakers talk in front of 500K students and they want more! Robert Peston was pretty clear – ‘I don’t want to go to Eton or Harrow, why do they need my help, it is State schools that have to help kids broaden their horizons’ that was where it started. He was regularly asked to speak in high end schools but noticed a lack of request from state. Years later he has a 1000 speakers on the books and big backing.

Let me talk about my personal experience, I have probably done around 6 talks so far, and each one is a joy. Watching often shy students slowly get up the courage to ask questions, begin to see signs of some reacting to talks. I have already had students email me to say they have started a blog or got a job etc – it’s so exciting. I hope I have encouraged a few to join LinkedIn and Twitter over the years and start to network. It’s the best part of my career. Give back – it feels good.

Speakrs4schools is now moving into the work experience space with S4Snextgen. Robert Peston hammered home the point that these kids don’t have the networks, they don’t have the privilege that many Interns have, ‘most Interns are populated by nepotism’ so true!! How many sons and daughters of senior staff people have got their kids in work experience? Many many…This is a great next step for companies in our industry to look into and try to support, I know I will be. 

Today saw me travel from Campion School in Northants to No10 in one day and it was an inspiring day! Already some students have LinkedIn! I know a lot of senior people out there in lots of different companies – I encourage you to look into this amazing organisation.

https://www.speakers4schools.org/

BertozziBytesize: Is nostalgia for vinyl & books a leading indicator of screen burn out?

Record sales are at an all time high, up 30% , they have not been this high since Nirvana’s Nevermind. Books are back – up 6%. We still love to send cards instead of emails when it really matters. Podcasts are growing exponentially, music listening is off the ‘charts’. We often hear about people wanting to ‘touch’ things like the feel of the book, or we relax on a Sunday when we have a newspaper and a coffee. It is a theme right now, a return to the ‘old school’.

I was thinking about this and I feel that we continue to apply rationalisations from 2005-7 to today. I think some of the above is true. Yes you can feel more relaxed with a book or newspaper. The art of putting a record on a player is captivating. It’s the same as rolling a cigarette or lighting a fire, it is a ritual. Settling back and reading a book is relaxing for sure. I am not sure it is for the same reasons today as for a few years ago.

It is because we instinctively know we need a break from screens. 

I don’t like us right now. I don’t like what we have become, what we have become. I hate myself for the amount I stare at screens. My heart sinks when I look around and see everyone buried in their phones, whether it is on a train, in a queue, walking. I notice that people can make it through a dinner party until about 10ish before phones creep out – ‘oh let me show you this video’ ‘let me show you a photo’ ‘let me send you a link’ you see it everywhere, all of the time. It is an addiction. I sit on a couch and check my phone, all the time, I used to watch TV.  We don’t look around when we walk, perhaps the most depressing thing of all. When we go in the car, my son looks out of the window, no screens, he sees stuff and comments. We could all learn from that.

I could go on forever on this topic. I logged out of Facebook for this reason. I am warming up to do the same with others. I feel a slight dread coming because of phone usage. So when people start to buy vinyl, when the book becomes cool again, it’s not because they like the feel of paper or vinyl. It is because they need a break. They want to use their eyes, use their brain without interruption, without a vibration, a drop down, a flash or a beeb. They don’t want to stare into the blue screen for 14 hours a day anymore. Scrolling through pages of irrelevance is starting to knore away at our souls.

The book is back, the coffee and the magazine, the lazy Sunday with the newspapers and music in the background, all of these are key indicators not of some old school desire to touch and feel, but rather that we need a break. Just as with climate change, the signs are there but there are less obvious massive changes, so it is with our behaviour. The signs are there, people need a break, digital detox, logging out of social media, I wonder whether these are the leading indicators amid a world where we shut down and realise how we need to look at our friends and family first and screens second.

 

Adland came calling. The best of Adland.

On the 19th September at 7pm, over 400 people walked in to the Electric Ballroom in Camden and demonstrated that we work in a very special, amazing industry. The reason was a devastating fire at Grenfell tower. The inspiration for the event came from one person, David Grainger. A month later and some frantic but effective campaigning and the team had raised 70K+, filled 70 tables and created a moment in time not to be forgotten.

The night itself was magical, friends and colleagues from across the industry, agencies both media and creative, publishers, tech firms all misled into this electric evening of music, emotions and love. Advertising is sometimes accused of being lightweight, pointless, not a serious industry but I was so proud of what we achieved in such a short period of time.

More importantly I feel like it was a release to be able to talk and write about something positive and uplifting in relation to the industry. So often the headlines are negative and I have written before that they will be the death of the industry as talent stops wanting to be part of it. This night however we saw the great side to our business, the side that shows we can react fast, that we care and that we are capable of doing good. We should not lose sight of that because behind the headlines lie thousands of good people working their socks off for their clients, trying to enjoy being in our business.

I cant extrapolate this one night to cover everything in our business but what I can say is that the headline writers, the intermediaries that deliver blows to media with glee, the consultants that pile on as they see an opportunity to make money for their short lived businesses need to stop and think about the good of the industry and all the great, passionate, caring, hard working people that populate it and not just a handful of seniors that really the headlines are about.

AdLondonCalling was a night to celebrate, to remember and we should use it as a reason to revel in a great industry and ask those out to tear it apart to think every once in a while about whether they are being too broad in their attacks. I love this business, I have loved agency side and now publisher side, we have a lot to be proud of, thanks Dave for getting this going, lets see how many other positives we can write about..

Programmatic advancement? : Just look to Amsterdam

A few years back, around 2012/13 we discussed how we could grow Audience On Demand more quickly in the region. How could we support all those smaller markets that could not sustain headcount dedicated to programmatic and yet wanted to be part of the picture. Back then we set up the ‘Amsterdam Hub’ for AOD and the very talented Anke Kuik came in to run it for me. We quickly built a buzzy and vibrant business servicing 10+ markets and successfully growing the programmatic footprint of AOD.

As was widely reported, VivaKi eventually decentralised all these teams and so the hub was no more.  Soon after that, I worked on global programmatic strategy across top clients and had the chance to see, hear and contribute to their progress. In almost all cases the advertisers were going back to basics and evaluating their tech, strategies, data plan and more, they wanted to set some common guidelines to many markets. As a result of many of these pieces of work we saw the re-emergence of the hub. Amsterdam is a particular favourite but I think it is fair to say you can find them all over, in London, Paris, US and so on, point being, the Hub is back.

However the big difference with the new hubs, either at a client or agency level are they are there to support ALL markets, big or small. They are there to support tech, data and media buying across a whole range of markets and with that you see a huge shift in how media is being traded, more so than ever before. The true potential of these hubs is becoming a reality, something that has been promised now for some years but is really taking shape and with that shifting the way we all do business. On my side having been a founder of a hub and now on the other side and working with them, it creates a fascinating dynamic as you have to work on many different levels. You need local expertise talking to local countries. You need local people talking to central hubs, you need International teams talking to the hubs. Wow, thats a lot of talking. It is all work and needs lots of coverage of teams, especially where hubs are at an advertiser level.

The thing is, these all take work to start with, but the benefits very quickly become apparent, as the rhythm settles in and people get used to the system, create a list of key partners, know where to go for certain inventory, on the sell side you start to see the benefits, especially where you have such strong, brand safe inventory as Spotify. Suddenly the much vaunted efficiencies of programmatic become apparent and we all start to benefit. Once the heavy lifting is done on the agency side or clients side and all their markets are adjusted to this new way of working then they can spend less time on execution and more on increasing sophistication of offering. Creating trusted market places of inventory, consolidating inventory decisions, partner selection, data strategy can all become the primary focus areas rather than the previously disjointed, inefficient work that happened five years back.

With every passing year this model is really starting to come together and I thoroughly enjoy seeing it, in some ways, even more from the Spotify side. I think we are going to see rapid acceleration (as if it can get faster) in programmatic. The clients and agencies are doing a great job of organising around this new world and I am excited to see how it progresses in the next five years!

BertozziBytesize: Spotify data: A Mirror not a Filter

Meet Marco Bertozzi

We talk a lot about data at Spotify and how it shows a lot about how you listen to music. We have a tool that I love, which allows us to add our account and get a pen portrait on our listening habits.  Now outside of this we go to great lengths to add colour to this data but I could not resist checking myself out on this relatively simple analysis about my music listening. I was desperate to see if Spotify thought I was as uncool as most people say! Turns out, it’s not so bad. Perhaps the 152 plays of Waves was a bit much and the fact I generally like Pop, Deep House and House is not appropriate for a 45yr old, but hey – keeping it real..

‘Spotify says: Marco is in his forties and has recently been listening to music in United Kingdom, where he lives. During his 6 years on Spotify, he’s streamed 15,877 tracks, which is far more than the average user. Of those streams, 4,205 were unique songs; that’s also way more songs than average. Marco changes up when he listens based on the day of the week. He listens quite differently on weekdays and weekends. Marco doesn’t listen to Spotify on desktop, instead preferring to listen on his mobile device. Marco is a lean-back listener. He doesn’t engage much with the app when listening, often having Spotify in the background; he plays songs all the way through, often letting songs from radio stations play without interruption, and he rarely skips songs. Marco has recently been jamming to Rag’n’Bone Man and John Williams, though Sia and Calvin Harris are his favourites of all time. In the last few weeks, he’s had The Chainsmokers’s “Don’t Let Me Down” on repeat. And he has listened to “Waves – Robin Schulz Radio Edit” by Mr. Probz 152 times on Spotify – more than any other song. When you compare Marco with all active Spotify users, his listening is very diverse. He listens evenly across many genres, and these genres tend to be very different: Pop, House, and Deep house. He does, however, have a strong preference for listening at specific times of day to music of specific moods. For example, Marco chooses certain times of day that need more instrumental music. Marco tends to prefer listening to his favourite music, but lately, he has been listening to more new music than he normally does. Marco listens to some nostalgic music, but not particularly often. When in the mood, he listens to songs by Howard Jones, George Michael, and John Williams.’

Learn anything? Well you learned a lot about my moods, what platforms I am listening on, type of music and how it forms part of my day. This is just a snippet of how we can work with advertisers and power their moments marketing. Understanding People Through Music will give us all insights that cant be replicated anywhere. Spotify as the worlds largest music streaming service is in a unique position to help brands do this, its an exciting proposition!

NB: Some of the above tastes are swayed by my pandering to my son’s likes! Family account coming soon!