A lot of the conversations folks have in Cannes are the same ones they’re having at home, the only difference being that both parties are wearing sunglasses and linen shorts.
One of those recurring threads is audio. Not unlike gaming, audio commands time and attention, but the ad dollars haven’t caught up.
It’s a head-scratcher that Per Sandell, Spotify’s chief product officer, spends a lot of time thinking about.
“Audio is by far the most underrepresented medium that exists in advertising today,” Sandell told AdExchanger in Cannes.
Hardly a surprising take from someone who oversees Spotify’s ad tech infrastructure, but he’s not wrong. As of last year, ad-supported listeners accounted for 63% of Spotify’s total audience, but only generated roughly 10% of its total revenue.
Out of sync
So, what’s the deal?
According to Sandell, the issue isn’t that marketers aren’t interested. It’s more of a plumbing problem.
Audio is scattered across sellers – “it’s historically been very fragmented,” he said – which makes it harder to buy than it should be. Measurement also lags other channels.
Spotify’s response has been to develop its own ad stack. It built a first-party ad server and launched an ad exchange plugged into most of the major DSPs, including The Trade Desk, Yahoo, Google’s DV360 and Amazon DSP.
“Across the board, no major [buying] platform really had audio as a big part of their inventory,” Sandell said.
As of Q1, roughly one-third of Spotify’s inventory is biddable, but pricing varies by format and context. For example, standard display units tend to be cheaper, while host-read podcast ads and high-touch sponsorships are pricier. Programmatic audio sits somewhere in the middle.
What matters more than price, though, is return on investment, Sandell said, because most biddable spend is governed by algorithms that automatically steer budgets toward whatever’s working.
“ROI is what drives pricing in the world we’re moving into,” he said. “As long as we’re able to deliver ROI and efficiently use impressions, we’ll be able to find the right way to deliver value to our clients.”
‘Bit of a conundrum’
The emphasis on ROI naturally leads to questions about measurement and control. For advertisers to treat audio like a core channel, Sandell said, they need to be able to manage it just like any other buy.
Spotify has been improving its review processes and strengthening its quality and safety checks, including screening ads before they run on the platform and monitoring what’s already live.
“These are the kinds of things AI is very, very good at,” Sandell said. “You can pretty much solve for these needs with the advancements in LLMs.”
On the creative side, Spotify is also using AI to take some of the friction out of making audio ads. For a long time, brands focused most of their energy on display, video and social, and audio was considered “a sort of back burner creative format,” he said.
But the barriers are starting to fall.
Better text-to-speech tools and prompt-based workflows mean advertisers can plug in key phrases to include or avoid, generate scripts, tweak the copy, select from a catalog of synthetic voices and background music and quickly turn the whole shebang into a finished audio spot.
According to Sandell, more than 7,000 advertisers have created over 20,000 ads using Spotify’s AI tools.
Not that any of this is a guarantee that audio will finally get a share of budget that matches engagement and time spent. For now, audio “is still one of the most underinvested areas in media,” Sandell said.
“But it’s one of the mediums with the highest impact and the highest amount of recall,” he said, “so it really is a bit of a conundrum.”
