Scoop: Spotify launching an ad exchange, will partner with Trade Desk
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Spotify is piloting an ad exchange, or a supply-side platform (SSP), to help scale its automated ad offerings, three sources familiar with the effort told Axios. The focus will be on video to start.
Why it matters: In building its own exchange, Spotify can capture more ad revenue from small- and medium-sized businesses and make it easier for existing clients, including big brands, to spend more efficiently with the platform.
- Those improvements will help the Swedish audio giant compete against bigger platforms like Meta and Google for ad dollars.
Zoom in: The new exchange, internally called Spotify Ad Exchange or SAX, can be plugged into various demand-side platforms (DSPs) to help connect advertisers directly to their inventory.
- Spotify's first DSP partner is The Trade Desk, one of the largest publicly traded ad tech companies in the world.
- Spotify began testing its SSP plugin with The Trade Desk last week.
- The partnership, for now, is focused on connecting The Trade Desk's North American advertising clients to Spotify's video ad inventory. Audio ad inventory will soon follow.
Between the lines: The Trade Desk partners with thousands of publishers to help make their ad inventory accessible directly to advertisers.
- It uses a technology called OpenPath to connect inventory from its most premium publishers to advertisers faster.
- Spotify will become one of the largest audio publishers to use OpenPath, a spokesperson for The Trade Desk confirmed. "Digital audio, in particular, is fast emerging as an essential digital advertising channel for our clients looking to reach consumers in a logged-in, authenticated environment," they said.
- As part of the partnership, Spotify will also join Universal ID 2.0, a cookie-less ad-targeting framework that was incubated by The Trade Desk years ago amid the deprecation of third-party internet tracking cookies.
- Dozens of publishers have joined UID 2.0 to provide advertisers with privacy-safe ways to target users online.
What they're saying: A Spotify spokesperson confirmed it was testing its new SSP with The Trade Desk, noting, "We routinely conduct pilots before launching products for our users, creators and advertisers."
- "We're excited for the important learnings to come from the initial period with The Trade Desk, but have no further news to share at this time," they added.
- A spokesperson for The Trade Desk said, "We are excited to extend our partnership with Spotify on this pilot to help advertisers have direct access to high-quality inventory with as much signal and transparency as possible."
Zoom out: The Spotify Ad Exchange will be Spotify's first major foray into scaling its automated ad business.
- To date, most of Spotify's programmatic, or automated, ad solutions have only been accessible via programmatic direct, or a method of buying automated ads through Spotify's sales team and not through an ad auction.
The big picture: In addition to its ad tech investments, Spotify has also been significantly ramping up its push into video, the fastest-growing medium for digital ad dollars.
- The tech giant last week said it would expand its music video offerings to nearly 100 markets globally, which should significantly increase its video ad inventory.
- On the business side, Spotify launched video ads for its connected TV apps last year, with Roku as its initial partner.
What to watch: Spotify has worked with many DSPs in the past to make its ad inventory accessible to more advertisers, but The Trade Desk is the first DSP that will have access to its new ad exchange.
- The company hopes to broker similar deals with other ad tech firms in the coming months to expand its automated offerings further.
