This article was very good, well written and easy to read-- if it is okay with you I would like to share it with my reader base next week when I update my chart analysis on SPOT alongside other growth picks I have.
Thank you for writing, and happy to have found your substack.
Your statement about the market potentially missing the market size of audio advertising is correct imo. But what I would also ask is how much does Spotify benefit from this? They get ads in between plays of audio items, but a lot of the big money in podcast advertising goes directly to the content creators for placement in their podcasts that an advertiser knows goes out to a specific target audience. Spotify makes $0 for any ads that are done in this style, automatically cutting them out of a large portion of the growing audio ad market. Is the market's current pricing somewhat a factor of knowing this element of the story?
Hey, thanks for your comment. So the ads in between plays is obviously a huge opportunity - and that is one of the things I am referring to. The other thing you may have seen / heard is that Spotify announced click through Podcast Advertising. In my view this will create easier to measure ROI for advertisers, better monetisation ( CPMs) for creators which Spotify will obv take a cut. I think therein lies the opportunity on the podcast side for $SPOT. The other thing which SPOT will start helping creators of pods do is put their work behind a paywall - which i understand SPOT will take a 5% share of also, creating another monetisation stream for the business out of podcasts. I think the market is actually missing how large this opportunity is.Hope that helps, but feel free to let me know your thoughts!
Interesting on the paywall for podcasts. My point was more specifically that advertising in the audio space for between plays and click-through is big, but the CPM rates for that is far lower compared to product placement in someone's podcast. Spotify can't make money off of the advertising that's placed by a podcaster into their own shows which limits how much ad revenue growth they can really capture
Hey understand your point, to be clear i was specifically talking about clickthrough podcast advertising which will be product placement in an actual podcast - SPOT will take a cut of that piece. Given advertisers struggle to measure ROI with the current set up, they will push podcasters to use clickthrus instead. This might provide a bit more context: https://newsroom.spotify.com/2022-01-06/spotify-introduces-call-to-action-cards-for-podcast-ads/
How does SPOT take a cut? Almost always product placement in podcasts is done directly between an advertiser and the podcaster, maybe for major people an agent helps place these and gets a cut. Unless spotify sets up a successful agency for placement and gets large numbers of people to use them for placement in shows, it won't give them any real gains. And if they're only taking 5% it could possibly not be margin accretive. Hard to see how they can break into this particular part of capturing ad share. Paywalling makes more sense
The 5% is only for paywalls (agree that makes sense and its substantially less then what Apple is charging). I think this is making SPOT the most attractive place for creators and advertises. My guess is that SPOT will ultimately charge for the clickthru infrastructure (in some way), and may also take an amount for each click.
This article was very good, well written and easy to read-- if it is okay with you I would like to share it with my reader base next week when I update my chart analysis on SPOT alongside other growth picks I have.
Thank you for writing, and happy to have found your substack.
Thank you for the feedback, glad you enjoyed it. I'd be grateful if you would. I've subbed you also.
Your statement about the market potentially missing the market size of audio advertising is correct imo. But what I would also ask is how much does Spotify benefit from this? They get ads in between plays of audio items, but a lot of the big money in podcast advertising goes directly to the content creators for placement in their podcasts that an advertiser knows goes out to a specific target audience. Spotify makes $0 for any ads that are done in this style, automatically cutting them out of a large portion of the growing audio ad market. Is the market's current pricing somewhat a factor of knowing this element of the story?
Hey, thanks for your comment. So the ads in between plays is obviously a huge opportunity - and that is one of the things I am referring to. The other thing you may have seen / heard is that Spotify announced click through Podcast Advertising. In my view this will create easier to measure ROI for advertisers, better monetisation ( CPMs) for creators which Spotify will obv take a cut. I think therein lies the opportunity on the podcast side for $SPOT. The other thing which SPOT will start helping creators of pods do is put their work behind a paywall - which i understand SPOT will take a 5% share of also, creating another monetisation stream for the business out of podcasts. I think the market is actually missing how large this opportunity is.Hope that helps, but feel free to let me know your thoughts!
Interesting on the paywall for podcasts. My point was more specifically that advertising in the audio space for between plays and click-through is big, but the CPM rates for that is far lower compared to product placement in someone's podcast. Spotify can't make money off of the advertising that's placed by a podcaster into their own shows which limits how much ad revenue growth they can really capture
Hey understand your point, to be clear i was specifically talking about clickthrough podcast advertising which will be product placement in an actual podcast - SPOT will take a cut of that piece. Given advertisers struggle to measure ROI with the current set up, they will push podcasters to use clickthrus instead. This might provide a bit more context: https://newsroom.spotify.com/2022-01-06/spotify-introduces-call-to-action-cards-for-podcast-ads/
Hope that makes sense! :)
How does SPOT take a cut? Almost always product placement in podcasts is done directly between an advertiser and the podcaster, maybe for major people an agent helps place these and gets a cut. Unless spotify sets up a successful agency for placement and gets large numbers of people to use them for placement in shows, it won't give them any real gains. And if they're only taking 5% it could possibly not be margin accretive. Hard to see how they can break into this particular part of capturing ad share. Paywalling makes more sense
The 5% is only for paywalls (agree that makes sense and its substantially less then what Apple is charging). I think this is making SPOT the most attractive place for creators and advertises. My guess is that SPOT will ultimately charge for the clickthru infrastructure (in some way), and may also take an amount for each click.
Your statement about the market potentially missing the market size of audio advertising is correct imo. But what I would also as
Hey pls, see above :)