Spotify is Purchasing Podcast Ad Company Megaphone

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Spotify is continuing to expand its presence in the podcast industry with the acquisition of ad tech company Megaphone.

Spotify is continuing to expand its presence in the podcast industry with the acquisition of ad tech company Megaphone, according to CNBC.

Spotify made the announcement on Tuesday. The acquisition will cost Spotify $235 million, but the details of that payment have not been disclosed. Spotify was down more than 5 percent in intraday trading.

Megaphone offers tech solutions for podcasters and advertisers that want to monetize their content. Its solutions include podcast hosting, distribution, and ad-insertion tools. Spotify has been ramping up its presence in the podcast industry. Just this year in the middle of the pandemic the company signed deals with Joe Rogan, Kim Kardashian, and Michelle Obama. It also acquired The Ringer and Gimlet Media in previous years.

Megaphone is owned by Graham Holdings Company. It was previously called Panoply Media and restructured in 2019 to focus on the tech offerings of podcasting. Spotify hopes this deal will allow advertisers to feel welcome in their podcasts.

Once the transaction closes, Spotify is authorizing the availability of its “Streaming Ad Insertion” tool available to all podcast publishers through Megaphone’s technology. This is the first time it will be accessible to podcasts apart from a select few. This tool makes ads “targetable—they’ll be relevant to the people who get them; measurable—we’ll more easily prove that they’re effective; and interactive…” 

Advertising has not been a large contributor to Spotify's revenue, but leaders in the company hope to expand that stream. The company's third-quarter earnings call revealed that 22 percent of monthly average users engaged with podcasts during the quarter and that ad revenue was up 100 percent year-over-year.

“I think there’s been very little innovation, particularly on the podcasting side in terms of how to better target advertising and allow creators to actually monetize their product in a much higher way,” the company’s CFO Paul Vogel said on its recent third quarter earnings call. “And I think our ability to help bring those tools and services into the ecosystem will be great for the overall growth of business, it will allow creators to actually make more money off of their podcasts. And I think it will benefit us as well.” 

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