Spotify has announced plans to buy podcast ad platform Megaphone for $235 million in a move meant to increase advertising revenues. This means that more podcasts on Megaphone will have access to Spotify’s ad insertion technology.
Spotify’s Streaming Ad Insertion (SAI) technology runs targeted ads inside podcasts in real time rather than pre-inserted during editing. Spotify relies on user data such as location, type of device used, age, gender, and interests to run user specific ads.
Therefore, Spotify is betting on this technology to allow advertisers to insert the right commercial at the right moment. The acquisition will see advertisers pay to host their shows on Megaphone or pay the platform to distribute their adverts.
Spotify has been diversifying from the music streaming business that has 320 million monthly active users as per Q3 results. The Q3 earnings showed that 22 percent of the total monthly average users engaged with podcasts.
Megaphone creates tools for podcast advertisers to connect with podcast publishers. The latest acquisition means that Spotify has spent more than $800 million to acquire podcast firms including Anchor, the Ringer, and Gimlet Media.
According to the Interactive Advertising Bureau, podcasts generates $708.1 million in advertising sales in the United States in 2019.