From this month, the ads you hear on the free version of Spotify’s music streaming service may be based not only on the music you listen to, but on what you’re doing and even your mood. Playlist targeting is the latest tool in Spotify’s advertising arsenal that aims to target ads more accurately at users via Spotify’s various mood and activity-based playlists, combined with user data such as age, gender, location and language.
The move follows similar forays by other online media streaming services into programmatic ad-buying, a method that employs an array of technologies that automate buying, placement and targeting of media placement. Although these data-driven, automated techniques are old news in the online world, their use in radio and music streaming is still relatively fledgling and could have considerable impact on the industry, where ad-buying is still largely manual.
Spotify
Playlist targeting uses themed playlists as a basis to indicate the kinds of ads that a particular user might be interested in. If you listen to a workout playlist, you could be subject to ads from sports or health-related brands; if you listen to a commute playlist, you might instead be targeted with coffee or work-based promotions. Once an advertiser has been matched with a playlist, Spotify offers it 100% voice to that group, effectively giving it exclusivity within that audience.
The feature works alongside Spotify’s existing tools, including cross-platform retargeting and sequential messaging, which allow brands to track users across their different devices as well as to play a series of connected adverts in sequence to a user. Spotify also aims to leverage the increased amounts of audience data it collects through its newly acquired music-analytics platform, the Echo Nest.
Pandora
Music streaming service Pandora increased its use of programmatic advertising in February, extending automated buying from desktop to its mobile platform, although still only in relation to display and banner adverts, rather than audio or video inventory.
In the UK, a recent partnership between Global and WPP’s Xaxis, will also allow advertisers to buy digital audio programmatically across a range of music publishers within the UK, including Blinkbox, Audiboom, Jango and Rdio, using a combination of Xaxis’ data management platform Turbine and Global’s Dax audio inventory.
iHeartMedia
On the radio side, US media conglomerate iHeartMedia launched its own programmatic capability this April, via partnership with the cloud-based, ad-server platform Jelli. This enables brands to purchase ad space on an automated basis across the entire US iHeartMedia network, comprising over 850 stations and 245 million monthly users. iHeartMedia similarly uses listener data to target adverts, including on music genre, weather, traffic patterns and even purchasing history.
The company’s subsidiary Katz Media Group, is due to launch a further programmatic radio ad-exchange targeted at third parties outside of iHeart’s network, called Expressway from Katz later this year.
Analysis
A few features unique to online radio and music streaming make the extension of programmatic advertising particularly interesting in relation to these platforms.
- Ad revenue still vital: Despite the more recent vogue for subscription-only platforms, only 15 million of Spotify’s estimated 60 million users subscribe to its premium paid service, and the company’s ability to generate revenue is still largely dependent on advertising to non-paying users. Spotify recently reported that ad revenue had increased by 53% year on year in Q1 2015 (up 380% when compared to Q1 2014). However, with competition from the likes of Beats, YouTube and more recently Tidal, as well as the often high costs of music licensing fees, getting its ad offering and data-analytics right is likely to be crucial to the company’s continued success.
- Use of streaming services is growing: In the US, the number of people listening to online radio doubled over the last decade, according to Edison’s Infinite Dial 2015. In April, Pandora and Spotify were similarly the first two music streaming services to simultaneously reach the top four in the US iPhone revenue charts, illustrating the popularity and reach of such music platforms.
- Ad engagement on the rise: Audio adverts frequently show higher levels of audience engagement than display or banner ads. Spotify for Brands’ Brand Impact Study found that a music streaming audience was more than two times as likely to pay more for, and feel more emotionally connected to, a brand. In addition, a recent RAB study showed that radio receives the second highest return on investment per advert, outperforming all mediums except TV.
The application of programmatic and demographic-based targeting does raise questions. Would it be insensitive (or even unethical) for example to target dating websites at those listening to a break-up playlist? Is programmatic quite as easily applied to a plethora of radio stations operating real-time audio, as it is to static display advertising online?
Despite these questions and however vexing the adverts may be when they interrupt your favourite music, it looks like ads in free music streaming platforms are here to stay.
Rebecca Davis is an associate at Olswang and a contributor to the adtech blog Adtekr, where this article was originally posted. Follow on Twitter @adtekr.
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