Spotify said Tuesday it will acquire Virginia-based podcast ad platform Megaphone, as the streaming platform aims to capture more advertising dollars.
The $235-million purchase of Megaphone is one of the largest podcasting deals Spotify has made to date. The company has spent hundreds of millions of dollars acquiring podcast production businesses, including New York-based Gimlet Media (the makers of the popular "Homecoming" series) and L.A.-based the Ringer.
Megaphone will help increase Spotify's ad revenue. The market for podcast advertising is expected to grow at a rate of 14.7% to nearly $1 billion this year, according to the Interactive Advertising Bureau Podcast Ad Revenue Report prepared by PwC.
Megaphone helps advertisers target 60,000 different audience segments such as millennial women across different podcasts. The company says more than 20,000 publishers and advertisers use its platform.
"We are incredibly excited to join Spotify to help advance the podcast medium for publishers and advertisers alike," said Megaphone's Chief Executive Brendan Monaghan in a statement. "We believe that Megaphone and Spotify's shared value in innovation will drive the podcast ecosystem forward around the world."
Spotify has focused on growing its presence in podcasts, as it aims to diversify its business beyond music streaming. In the third quarter, the company said it had 320 million monthly active users and 22% of them engaged with podcasts on its platform.
The Megaphone acquisition continues Spotify's plans to improve the tools available for advertisers and podcast publishers.
"We are still in the early chapters of the streaming audio industry story, but it is absolutely clear that the potential is significant," said Dawn Ostroff, Spotify's chief content and advertising business officer, in a statement.
Earlier this year, Spotify announced new advertising technology that would track how often a Spotify podcast listener heard an ad and what its reach was. After the acquisition closes, publishers who use Megaphone will have access to Spotify's ad technology.
Megaphone has around 70 employees and is owned by Graham Holdings Company. In the third quarter, Megaphone had operating losses but its "revenue increased significantly in the first nine months of 2020, as both advertising and platform sales experienced rapid growth during the period," according to Graham Holdings Company.
The podcasting industry has consolidated as larger players including Spotify, iHeartMedia and SiriusXM increased their footprint in podcasting. Last month, SiriusXM acquired podcast business Stitcher for up to $325 million. iHeartMedia also announced it will acquire Voxnest, a provider of podcast analytics and advertising tools, for an undisclosed amount.
