RTB became so popular that Pandora adopted a similar service a few years later.īeyond high engagement rates without expensive licensing fees, advertisers love RTB ads for how simple it is to buy the inventory. Meanwhile, massive brands, like Adidas, that paid for advertisements received tens of thousands of engagements from only one display ad. One year after Spotify Ad Studio launched, over 18% of the service’s ad-supported revenue came from real-time bidding audio ads. RTB advertising was an instant success, both for Spotify and advertisers. In addition, RTB allowed companies to skip costly single-use or licensing payments and instead compete with other advertisers through a real-time auction. The platform allowed advertisers to purchase display ads for users’ curated playlists or audio ads for listeners without Spotify’s premium service. Spotify popularized RTB in 2016 through their original ad platform called Spotify Ad Studio. Through both platforms, advertisers can purchase display and audio ads nearly instantly through a process known as “real-time bidding,” or RTB for short. How RTB Audio Ads WorkĪdvertising on Spotify and Pandora works differently from other websites and applications. This includes how users interact with each app, the cost of advertising on Pandora and Spotify, the average revenue of audio ads on music streaming services, and most importantly, where brands can buy effective ad space. While users can stream music on both Pandora and Spotify, how the music is delivered and how users engage with each platform is very different.īelow, we will examine everything you need to know about which music streaming platform is better for your company. While there are several ways people can stream audio, the two platforms that stand head and shoulders above the rest are Spotify and Pandora. Unfortunately for Spotify, they do not possess any proprietary purchase data, which will limit its ability to algorithmically target.Online music streaming has continued to grow its audience exponentially over the past ten years, so it should be no surprise that advertisers have found new and creative ways to run ads to these audiences. For the same reason, some companies are having great success with Amazon’s ad platform (Amazon holds a fair amount of proprietary purchase behavior they can use to make lookalikes). But when Facebook was able to incorporate purchase data into their algorithms, lookalikes became vastly better than any other targeting method. When Facebook launched lookalikes, it was a poor substitute for micro-targeting via interests. What key element is still missing? The ability to build predictive lookalike audiences. You might be listening to the Joe Rogan Experience today, but if I know you were listening to the MarTech podcast yesterday, then I can target you with marketing technology ads on Rogan’s show. Marketers can target interests with greater precision. They know what the listener has listened to in the past. These granular details offer even better geo-targeting than Facebook Spotify can track the user’s location, as well as their billing address, and other places where they spend their time. Now marketers can pay based on a more accurate number of ads heard, rather than total downloads. Plus, Spotify could track if the ad was heard (or skipped). They know when the listener played the podcast. Now marketers can target based on demographics. And if Netflix’s audience continues to increase, they can afford to licence or create even more content, which makes their product better, which attracts more subscribers ad infinitum (or at least until they run out of humans who want to watch premium long-form video). Regardless of their margins today, they can “grow into profitability” just by acquiring more customers. As Netflix grows their subscriber base, the cost to produce a given amount of content remains unchanged. They have very high fixed costs - paying licence fees for content from other studios as well as producing their own original content - but very low variable costs. Aside from a 30-day free trial, there are no (legitimate…) ways to enjoy Netflix for free. The Netflix model is straightforward: the company hosts a platform of video content and they charge customers a monthly fee to access that content. Netflix and Spotify both stream media, but with two very different business models.
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