Spotify to Buy Podcast Hosting Company Megaphone for $235 Million

Spotify to Buy Podcast Hosting Company Megaphone for $235 Million

Giving podcast publishers and advertisers more options for monetizing content using Spotify’s proprietary Streaming Ad Insertion technology

Spotify is upping its podcasting game with the $235 million acquisition of podcast hosting company Megaphone. Megaphone, which hosts more than 5,500 podcasts, will help Spotify with its strategy to further expand into the podcast market and to better serve podcast publishers and advertisers with innovative tools, like Spotify’s proprietary Streaming Ad Insertion (SAI) technology which was introduced earlier this year. Using listener data, SAI serves up relevant ads in real-time to podcast listeners.

The Verge said that the acquisition won’t impact Spotify’s own podcasts, which are already being hosted on Megaphone. The big change is that non-Spotify, Megaphone-hosted podcasts will soon have access to the Streaming Ad Insertion technology to help advertisers target listeners and podcast publishers to monetize their content. No other podcast platform has access to this technology, so podcast advertisers and publishers will have a competitive advantage over other platforms.

SAI will be available to third parties

“Once we come together, we will soon make Streaming Ad Insertion available to podcast publishers on Megaphone, the first time this technology will be made available to third parties. That means that podcast publishers will be able to offer more-valuable podcast audiences to advertisers based on confirmed ad impressions (i.e., that their ad was actually heard),” said Spotify in their November 10, 2020 announcement.

In a separate interview, Jay Richman, Spotify’s VP of global ad business and platform, commented on the acquisition.

“For our publishers this is really exciting because it means we can help you earn more from your work. You can opt-in and have your content monetized, matching your loyal fans with even greater demand from advertisers. And like Brendan said, we’re very excited to be making our SAI ad technology available to podcast publishers on Megaphone. That means, as a podcast publisher, you’ll soon be able to offer more valuable podcast audiences to advertisers by allowing them the option to buy on a confirmed ad impression,” Richman said.

Podcasts are gaining ground on Spotify

Spotify is investing in podcast-related acquisitions.

Two years ago, Spotify said they believed that streaming audio including music and podcasts are the future of the company, and that strategy seems to be paying off. Spotify’s podcast catalog now includes more than 1.9 million titles featuring stories, sports, education, wellness, and more.

In its third quarter earnings report, Spotify noted that 22% of their total monthly average users (MAUs) used podcasts during the third quarter and podcasting advertising revenue is up close to 100% compared to the same period last year. Podcasts overall are expected to hit $1 billion in advertising spending in 2021, but that represents about estimated 0.4% of total media ad spend.

“From groundbreaking authentic voices to can’t-miss news and information, podcasting is one of the most exciting mediums of our time. We are excited to collaborate with Megaphone to drive this business forward,” Spotify said.

Trajectory of podcasts in last 5 years

In an interview with Spotify, Brendan Monaghan, CEO of podcast hosting company Megaphone, talks about the trajectory of podcasts.

“So much has changed in just 5 years. But there are a few things that really stand out. The first is technology: With the maturity of the mobile market, we instantly have access to content whenever or wherever we want. There’s no connecting a device and downloading required. It’s right there for listening at our convenience. The second is a maturing business model: With growing interest from advertisers, particularly on the brand side, podcasts are generating revenue at a scale that they have never experienced, which is putting money back in the hands of creators. And the third is content development: As more dollars flow to the space, we’re seeing significant investment in shows that go well beyond the normal “chat” style podcast. We’re seeing in depth storytelling, investigative reporting and even shows produced with the sole intent of developing IP for television and film,” Monaghan said.

Other Spotify investments and acquisitions

The acquistion of podcast hosting company Megaphone represents the latest investment by Spotify into the podcast market. Here are other notable deals made by Spotify:

Insider Take

Spotify is on a buying spree, but all of their acquisitions are strategic, giving it a competitive advantage over other podcast platforms. This news comes the same week that Spotify hints at a subscription podcast service, according to The Verge. Apparently, a survey distributed via the Spotify app mentioned four possible podcast subscription plans, ranging in price from $3 to $8. A spokesperson said that there are no concrete plans for a podcast subscription, but it is seems like the company is testing the waters to see if there is interest in such a subscription option.

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