It’s been just a year since Spotify entered the podcasting market, and consumption is already growing like gangbusters.
Podcast hours streamed on the platform grew 200% year over year, and more than 16% of Spotify monthly active users (MAUs) engage with podcasts, the company said in its Q4 2019 earnings report on Wednesday.
Spotify also confirmed its rumored acquisition of Bill Simmons’s The Ringer, which will not only add 30 sports-related podcasts to its slate but push Spotify into digital media more broadly.
“The trend we’re investing in is that radio is moving online,” said Spotify CEO Daniel Ek on the call. “We think The Ringer is going to be a tremendously valuable property as we look at the evolution of sports over the next decade.”
Spotify entered the podcast market with much fanfare when it acquired Gimlet and Anchor in February 2019, and Parcast a month later. The platform now carries 700,000 podcasts and has made exclusive deals with celebrities from The Obamas to Amy Schumer.
Heavy investment in content caused some “near-term drag” on gross margins, said CFO Paul Vogel. But Spotify is seeing that podcast listeners stream more music and spend more time on the platform overall. Monthly active listeners grew for the third consecutive quarter, up 31% year over year to 271 million in Q4.
“It’s a healthy user trend that we think will lead to higher lifetime value,” Ek said.
Spotify doesn’t yet monetize licensed podcasts on its platform, but it’s building tools to help podcasters better target audiences and measure results. At CES in January it launched Streaming Ad Insertion, which allows real-time targeting and granular audience measurement on Spotify originals and exclusive shows.
“All of the things you expect in video and display with measurement and targeting … is lacking in podcasts today,” Ek said. “If you have those capabilities, you can raise CPMs across the board because advertisers feel more confident in the results. If we do that, it will be a tremendous benefit to podcast [creators] and Spotify.”
Sales manager snafu
Separately, Spotify’s ad supported revenue, up 23% year over year to $239 million in Q4, fell short of expectations in part due to a rocky transition off of Google Sales Manager in July 2019 that impacted the business through December.
“Some impacts we had from migration to a new order management system carried over into Q4,” Vogel said. “That momentum came back in the second half of the quarter… it just wasn’t enough to make up for short fall in the first half.”
Spotify’s revenues grew 24% year over year to roughly $2 billion in Q4, with premium subscription revenues up 24% to $1.8 billion. Average revenue per user was down 5% to $5.12 on the premium business as the platform experimented with a new 90-day trial promotion.
Roughly 25% of Spotify’s revenue comes from programmatic buys, and the platform is seeing momentum with its self-serve platform, Ad Studio, Vogel said. Spotify launched dynamic ad breaks in Q4 which will help it better monetize shorter listening sessions.
“We haven’t done a great job of that,” Vogel said.