Spotify’s Levick: Brand Partnerships First, Programmatic Later (Or Never?)

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Jeff Levick, chief marketing solutions officer at streaming music app Spotify, sat out most of Advertising Week this year. Instead, the former AOL global ad sales chief has been working on longer term plans that involve branded playlists and building out the mobile ad offerings, while leaving the conference-going and client meetings this week to the ad sales team.

We spoke with Levick, who’s been in the post for just over a year, about getting marketers to accept audio advertising and why Spotify does not see programmatic buying as an advantage to its nascent ad strategy.

AdExchanger: How has the introduction of Spotify Radio opened up advertising opportunities for the company?

JEFF LEVICK: The most important thing about Spotify Radio is that it’s enabled us to have a mobile free product. Part of the value proposition of Spotify is not just unlimited free music on the desktop, but the ability to have the portability of your music in our subscription version. Having the addition of a free, ad-supported mobile product allows us to deliver targeted advertising to mobile as well the desktop.

What’s the balance between subscribers – who aren’t served advertising – and the users who accept the free, ad-supported access?

We've said publicly we've got more than 4 million subscribers globally and more than 15 million users on the platform. Clearly, the free product is larger than the paid subscription side and will likely continue to be that way. For us, it's about having an experience for both, making the barrier to entry very low for listeners. But the bottom line is that both sides of the business are continuing to grow.

How does the divide between audio ads and traditional display ads work out?

Obviously, we're an audio-based platform, but we also have a visual element. The best advertisers and the top advertisers have really figured out how to connect those two and actually use both audio and display together. Spotify syncs those two to create true custom products and true custom messages for our audience.

What’s the appeal to advertisers? Is it audience size? Is it the ability to segment audiences by the music they listen to and the playlist followers they have?

Our audience is highly influential. They’re trendsetters and early adopters. To have a platform with a huge mass of those types of consumers to be able to speak directly to them through audio, but then point them to a targeted visual message, that’s where we've seen performance truly outperform anything else in isolation. It's about leveraging the power of them together, the true power of the Spotify platform.

Veronis Suhler Stevenson estimates that that combined ad spending on broadcast and satellite radio is about $19 billion annually. Does Spotify believe it can take a bite of that spending and claim it for streaming?

To be clear, “radio” is a feature on Spotify.  Spotify is a much more immersive content platform because we have such highly-engaged users who are spending more than 90 minutes a day on the platform.  They're not passive listeners.  Radio is on in the background or you could be doing something else. With Spotify, because it's such an immersive experience where the curation is done so much by the listener, you really have a lean-forward audience who are actively engaging and actively clicking. That is a huge opportunity for advertisers to present their offerings in front of such an attractive consumer.

What sort of ad categories does Spotify attract? Since you started, have you been focusing on bringing in any new categories of marketer?

There are certain categories that have always had long, rich histories around music. We see those brands that already have music strategies and already understand the power and the passion around music. It's very easy for them to understand how to extend their existing audio strategies to include Spotify. That’s particularly true of entertainment marketers. It also includes automotive categories, consumer packaged goods. But it doesn’t mean that Spotify only works on those categories. It just means that they were the early adopters.

What I think is really interesting is that in certain platforms on the web, you typically find that the first ad adopters might be more of the direct response variety. But for us, we have dozens of global brands as the early adopter of this platform.

Although not identical to Spotify, Pandora does compete in the audio ad space. They often get a lot of pressure from shareholders and analysts to consider adding more audio ads per hour of listening – and they have consistently said there are no plans to do so. Is Spotify considering making more audio ad inventory available?

We're always looking at this question of whether we have the right amount of audio ads and formats. We think of it less around the number of ads per hour, however. We view it from the perspective of what's best for the consumer experience. We're always constantly examining consumer feedback about how they prefer to engage with advertising. We view ads as content. Commercial content is a part of the range of programming and offers we present to consumers within each listening hour.

Secondly, we do not just accept radio ads and repurpose them for our platform because what we've found is that those placements don’t perform nearly as well as the advertisers that have taken the time to understand our consumers, their profiles, what they're interested in.

Spotify is available as an app on the desktop, the smartphone and the tablet. For listeners, is it all a “lean-forward” experience? Or is it different for each device?

That’s something that Spotify and every multi-screen, multi-channel media company is thinking about and looking at in real-time. To us, the answer is focused on the consumer experience. The goal is to create interaction between devices, to make it all more seamless, more simplified and more consistent. That’s the type of innovation that you'll see coming out of Spotify. It’s all about that full user experience, that full immersive experience and how the devices work together, not how the devices work in isolation.

Aside from the traditional direct sales, do audience buying and real-time exchange environments play any role in Spotify’s ad strategy? If not, any plans to work with RTB systems?

Today, it's not part of our business. While I'm of course very familiar with RTB and the exchange ecosystem, it's not something that we need to participate in at this point in time. In terms of our growth, it’s just not something we need to participate in. Obviously, understanding data and the value of data for greater targeting relevance is incredibly important to us. That’s the effort where we’re putting in the most energy. We’re making sure that we’re doing the best job of handling our own targeting and protecting our own data.

What other ways are you trying to generate ad dollars?

The app platform that we launched nearly about 10 months ago is a good example of the other methods to broaden our value to marketers and consumers. From the brand side, there are a lot of creative and inventive things that companies are now starting to do on this platform.

One good example of the kind of unique marketing opportunities we can do is Reebok’s recently launched app on Spotify, Reebok FitList. The idea is to give users the perfect music for their workout. In conjunction with the launch of the app, Reebok has created 100 limited edition “Reebok FitList boxes” that will hold a pair of RealFlex Transition 2.0 shoes.

With our API, a marketer like Reebok – or Coca-Cola, McDonald’s, Intel or other clients that we work with – can curate music experiences for consumers. Those users can then share that branded playlist with their communities. It's still early days as it relates to the interaction between brands and music. But we take confidence in the fact that top brands have decided to take the first step into bringing these experiences to consumers and do something a little differently than what’s generally available for online marketing.

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