Dive Brief:
- Spotify Technology reported growth in advertising revenue of 31% from a year earlier to 360 million euros ($365 million) as the audio-streaming company broadened its reach. Total monthly active users grew 19% to 433 million, partly driven by a 22% gain in ad-supported listeners to 256 million worldwide, per an earnings presentation.
- Spotify ended the quarter with 4.4 million podcasts, up from 4 million in the prior three-month period. Looking ahead, Spotify estimated that it will expand its monthly users by 17 million during the current quarter to 450 million, including the addition of 6 million subscribers to hit 194 million.
- Successful marketing campaigns in India, Indonesia and the Philippines helped expand its user base outside of North America, Europe and Latin America, which make up 76% of its listenership. Generation Z users in Latin America were a key source of growth, along with European users who reactivated their accounts.
Dive Insight:
Spotify’s 31% increase in advertising revenue matched the growth rate of the prior quarter, a sign of continued strength that defied a slowdown in revenue among digital ad giants. Amid economic uncertainty and surging inflation, Facebook parent Meta Platforms this week reported its first decline in revenue with a 1% slide from a year earlier to $28.8 billion. Alphabet, the parent of Google, said its revenue rose 13% to $69.69 billion, the slowest growth since the pandemic caused many industries, such as travel, to pull back on ad spending.
“For advertising, we did see some softening in trends over the last two weeks of June,” CFO Paul Vogel said in prepared remarks. “With that context, we expect solid growth in Q3, albeit slower than we might have forecast earlier in the year... despite an uncertain macroeconomic environment, we continue to be highly encouraged by the trends we have seen year to date.”
Spotify’s ad growth is one indication that its major push into podcasting is helping to diversify revenue, 87% of which comes from subscriptions to its premium service. The paid tier doesn’t carry advertising in music streams, but podcasts have multiple kinds of sponsorship formats including sponsor-produced and host-read ads that can be dynamically inserted into commercial breaks.
The company released 100 new original and exclusive podcasts worldwide during the second quarter, helping to grow listenership by “substantial double-digits” from a year earlier. Its “Batman Unburied” series produced with DC Comics overtook the hit “Joe Rogan Experience” as the No. 1 podcast in several key markets, according to the company.
Spotify reiterated its goal to reach 1 billion users by 2030 as it creates consumers experiences that differentiate its platform from other digital media outlets. The company is expanding its audiobook content with the acquisition of Findaway, and its recent acquisition of artificial intelligence company Sonantic will add to its audio creation tools. Amid the more immediate economic uncertainties, the company cut its hiring plans for the second half of the year by 25%.
