From this May (and providing you don’t subscribe to the ad-free paid service) the adverts you hear on Spotify could be based not only on the music you listen to, but on what you’re doing and even, theoretically, on your mood. The new addition to Spotify’s set of advertising tools is called “Playlist Targeting” and aims to target ads more accurately at users via Spotify’s various mood and activity based playlists, combined with user data such as age, gender, location and language. The move follows similar forays by Pandora and US media group iHeartMedia into programmatic ad-buying, and is a sign that radio and music streaming are increasingly seeking to leverage the data-driven, automated techniques that are already widespread online. However, will this really be enough to lure advertisers back to radio?
The developments so far
While many online music streaming and radio services use audience data to target their adverts, Spotify, Pandora and iHeartMedia have been leading the field, with all three recently announcing new programmatic or demographic-based capabilities. Although such techniques are old news in the online world, their use in radio and music streaming is still relatively fledgling, and could have considerable impact on an industry where ad-buying is still largely manual.
In the case of Spotify, “Playlist Targeting” uses themed Spotify playlists as a basis to indicate the kinds of adverts a user might be interested in. Those listening to “Workout” or “Active” playlists could therefore be subject to ads from sports or health-related brands, while those listening to a “Commute” playlist might instead be targeted with coffee or work-based promotions. Once an advertiser has been matched with a playlist, Spotify moreover offers it “100% voice” in that group, effectively giving it exclusivity within its sector to that particular audience. The playlist function therefore also gives Spotify a useful way of segmenting the market, so that brands operating in the same sphere can target subtly different playlist audiences without having to compete directly for the same users.
The playlist feature combines with Spotify’s existing tools such as cross-platform retargeting and sequential messaging, which allow brands to track users across their different devices, as well as to play a series of connected adverts in sequence to a user, often based on previous interest or engagement with the ad. Spotify also aims to use the increasing amounts of audience data collected by its newly-acquired music-analytics platform, the Echo Nest, to further hone and improve its brand targeting.
On the radio side, US media conglomerate iHeartMedia launched its own programmatic capability this April, via partnership with the cloud-based ad-server platform Jelli. The platform will enable brands to purchase ad space on an automated basis across the whole of the iHeartMedia network, comprising over 850 stations and 245 million monthly users in the US. The company will also use data collected on listeners to target adverts based on psychographic groups, such as via music genre, weather, traffic patterns and even purchasing history. iHeartMedia’s subsidiary Katz Media Group, will similarly launch a programmatic radio ad-exchange targeted at third parties outside of iHeart’s network, called “Expressway from Katz” later this year.
Music streaming service Pandora again increased its use of programmatic advertising in February, extending automated buying from desktop to its mobile platform, although still only in relation to display and banner adverts, rather than its audio or video inventory. In the UK, a recent partnership between Global and WPP’s Xaxis, will similarly allow advertisers to buy digital audio programmatically across a range of publishers within the UK, including Blinkbox, Audiboom, Jango and Rdio, using a combination of Xaxis’ data management platform Turbine and Global’s Dax audio inventory.
The extension of programmatic techniques to radio and music is in many ways unsurprising, following on from the development of programmatic in television advertising. There are however a few features unique to radio and music, which make such developments particularly interesting in these sectors.
Despite the more recent vogue for subscription-only platforms, advertising revenue is still vital to the success of many music-streaming platforms. With only 15 million of Spotify’s estimated 60 million users subscribing to its premium paid service, the company’s ability to generate revenue is largely dependent on its ability to leverage the data and audience-reach it collects from its non-paying users. The company recently reported that ad revenue had increased by 53% year on year in Q1 2015 (up 380% when compared to Q1 2014). However with competition from the likes of Beats, YouTube and more recently Tidal, as well as the high licensing fees often charged by artists and studios, getting its ad offering and data-analytics right, is likely to be crucial to the company’s continued success.
Evidence further shows that far from being in decline, more and more people are tuning into radio and online streaming. In the US, the number of people listening to online radio for example doubled over the last decade, with Edison’s Infinite Dial 2015 finding over 53% of Americans now listen to online radio monthly, and around 44% weekly (up from comparative figures of 47% and 36% in 2014). On 20th April 2015, Pandora and Spotify were similarly the first two music streaming services to simultaneously reach the top four in the US iPhone revenue charts, coming in at numbers 3 and 4 consecutively, and ousting even the popular gaming sensation, Candy Crush Saga from the top 4.
Far from being a frustrating part of the listening experience, audio adverts also show much higher levels of audience engagement and follow-through than display or banner advertising. Although perhaps not wholly impartial, Spotify for Brands’ Brand Impact Study found that a music streaming audience was over two times as likely to pay more for and feel more emotionally connected to brands and over 1.5 times more likely to make positive rational associations with a brand. Recent RAB studies again show that radio has the second highest ROI per advert, out-performing all mediums except TV, and that adding music and audio to an ad campaign serves to greatly increase its efficacy and emotional connection with an audience.
There are easy critiques of both programmatic and demographic-based targeting when applied to audio. Would it really be ethical for example to target dating websites (or in an extreme case even anti-depressants) at those listening to a break-up playlist? Is programmatic quite as easily applied to a plethora of radio stations operating real-time audio, as it is to more static display advertising online?
These issues aside, it is easy to see the potential. However annoying the adverts may be when you’re listening to your favourite music on Spotify, it looks like they’re here to stay.