Spotify's podcast ad revenue jumps 627% in Q2 ' TechCrunch

Spotify played ads for its Originals & Exclusives in the minutes preceding its quarterly earnings call. These included the True Crime show Deathbed Confessions and the sex and relationships podcast Call Her Daddy. Spotify acquired them recently in a $60 million deal. Although it was funny to hear Alex Cooper's voice saying, Hey, daddy Gang! while investors log into an 8 AM conference call, the message was clear: Spotify is serious in growing its podcast business.It would be alarming if this area didn't see significant growth, considering how many podcasting businesses Spotify has acquired in the last few years. Podcast listening has increased by 30% over the past year among Spotify users, while total podcast hours consumed rose 95%. Podcast ad revenue grew by 627% in the same period, exceeding all expectations. Spotify credits this success to a triple digit increase in year-over-year revenue at its studios (The Ringer and Parcast, Spotify Studios and Gimlet) and exclusive deals with The Joe Rogan Experience, and Obamas Higher Ground. Spotify also mentioned its November acquisition Megaphone, a podcasting and advertising company.CEO Daniel Ek stated that the current outperformance is limited by the availability and quality of our inventory. This is something we are actively working to solve. We are no longer relying on our advertising business for more than 10% of our total revenue. I expect ads will continue to make up a significant portion of our revenue in the future.Spotify launched paid podcast subscriptions in April through Anchor, the podcast host it purchased in 2019. Creators can select to view certain content behind paywalls. Apple also launched a similar feature, although it is too early to predict how these subscription services would impact creators and listeners. Spotify shared some information about its Audience Network which is an audio ad platform. Spotify's podcast inventory has tripled since April's launch. Spotify also saw a significant increase in unique advertisers, and a double-digit rise in CPMs (cost for every thousand impressions), although they didn't give specific numbers.However, the more influence a platform like Spotify has on the podcasting industry, then the less options creators have for monetization. The ubiquity and popularity of streaming platforms has had a negative impact on musicians who are now working together to get better compensation from Spotify. According to the Justice at Spotify movement, artists receive $0.0038 per stream of a song. This means that an average song must be streamed 263x to earn a dollar. While Spotify has grown during the pandemics, live shows have been the best way for musicians to make money in this age of streaming. Artists are struggling to get on tour while it is unsafe.Ek mentioned live performances on Greenroom (a Spotify Clubhouse clone), as a way for musicians increase their revenue during this morning's earnings call. Spotify has been testing live concerts as an income stream in the last quarter by partnering with artists such as The Black Keys. However, small artists may not be able to trust Spotify due to its refusal to allow streaming to be a viable option to earn a living from their work.Ek said that live is something that many of our creators find meaningful and that they are excited about. He also stated that Spotify has seen positive results from its digital live events so far. We want creators to have as many options as possible to convert listeners into fans and super fans. This will allow them to increase their monetization.Spotify did not reach its monthly active user (MAU) target in Q2, but other metrics showed a trend upwards, such as paid subscriber growth or revenue. Spotify attributes the MAU growth bump to COVID-19's lingering effects and an issue Spotify experienced with its third-party verification system.Paul Vogel, CFO, stated that this was an issue at our end. It is estimated that this email verification change caused friction that affected about 1 to 2million of MAU growth. This has been fixed and shouldn't have an impact on Q3.Spotify has 365 million MAUs. 165 million of them (or 42.5%) are paid subscribers. This is still far more than Apple Music, which had 60,000,000 subscribers in 2019, but has not released updated figures since.