Spotify announces major expansion, new ad network

Spotify on Monday announced a new advertiser network called the Spotify Audience Network that will combine all of the audio streaming giant's music and podcast ad inventory in one place when it launches in coming months.

Why it matters: The first-of its kind digital audio network will make it possible for marketers to be able to run targeted digital audio ads at scale, similar to what they are able to do now with banner ads or search ads on Facebook and Google.

• Advertisers will be able to reach consumers across all of its original, exclusive and independent podcasts, as well as podcasts that are distributed by Megaphone, a podcast network it acquired last year.

Details: The audience network is the culmination of many products that Spotify has been building and acquiring for years.

• In 2017, the company made its first foray into automated digital advertising by setting up a self-serve advertising portal, which allowed advertisers to buy their own ads in an automated fashion across Spotify's music content. On Monday it added podcasts to the self-serve tool.
• In 2019, the company the company bought Gimlet, an audio production company, and Parcast, a long-form podcast production studio. It also bought Anchor, a free podcasting platform that allows independent creators to make and monetize their own podcasts.
• In 2020, the company launched Streaming Ad Insertion, a technology that enables Spotify to place quality ads ready by hosts or voice talent within different podcasts, as opposed to radio-style commercials. It acquired podcast monetization company Megaphone later that year to scale the offering to all of the podcasts off of Spotify's platform that are a part of Megaphone's network.

Be smart: These new products and acquisitions have collectively helped Spotify create an end-to-end audio network for distributing and monetizing podcasts.

Yes, but: In order to make sure there's enough ad inventory to run Spotify's ad network, the company has had to invest in tools that will help it scale the creation of podcasts, and lure more listeners.

• On Monday it announced several new podcast partnerships and tools designed to make it easier for people to produce more engaging podcasts, including making it possible for podcast creators to add videos and interactivity, like polls and Q&As, through Anchor.

• It also debuted even more new exclusive podcast content, including a new podcast with Barack Obama and Bruce Springsteen.

The big picture: Spotify is tapping into a booming digital audio market, but as with all new mediums, consumer adoption has far outpaced monetization.

• For now, traditional radio still far outranks digital audio platforms like Spotify and Pandora in ad revenue, but Spotify is hoping that the development of its new ad tools and investments in content will help it close that gap.

What's next: Spotify says it plans to launch in 80+ new markets in the coming days, which it anticipates will make its service available to 1 billion people worldwide. The streaming audio giant is currently available in 93 markets.

• The expansion will make Spotify available in 36 new languages across countries where the internet population is growing very quickly, like Bangladesh, Nigeria and Pakistan.

Go deeper: Spotify's plan to dominate audio ads