Spotify's Music Success Shines A Light On Podcasts

Good news from Spotify this morning that it has beaten its forecasts to record a rise of a third in revenues, to just over a billion and a half Euros, in the first quarter of the year. It also announced that it has hit 100 million paying customers.

This is especially significant not just because it gave its shares an immediate 5% lift, but also because of the area it has clearly marked out as a differentiator between it and its main rivals. Its major investments, buying Gimlet Media and Anchor, have created its own podcast creation business.

Many observers may have gotten the reasoning without fully understanding the implication. There are two compelling, driving forces behind the move into podcasts.

The most obvious is advertising revenue. Warc ended last week with a bold assertion that podcast advertising is set to double by 2022 to $1.6bn. It attributes this to the rather obvious point that podcasts are becoming increasingly popular and at the moment are receiving, what it calls, parts of brands' "experimental" budget. 

The unwritten assertion, one assumes, is that it will continue to not only receive experimental budget, looking to see if a format works for a brand, but also more mainstream budget once, once presumes, it has been proven to work. It's worth remembering that GlobalWeb Index figures that show, at the moment, one in three people listen to podcasts and, of that number, two in three are aged under 35.

Curiously, as an aside, the UK is at the bottom of the podcast listening penetration table with just 18% currently listening in. Certainly room for a lot of growth if the consumer behaviour here catches up with the rest of Europe and beyond. 

If budget doubling is one reason to watch the podcast channel, and for Spotify to make podcast-creating investments, another compelling reason is competition.

GlobalWebIndex has Spotify in third place, as the destination most people go to for their podcasts. YouTube is way out ahead accounting for half the global market with Apple and Spotify neck and neck in race for second and third spot. 

As Google and Amazon beef up their music offerings, the latter even now tailoring packed for Echo device owners, having its own unique content is an obvious way for Spotify to differentiate it. All the services can claim to have multi-million numbers of records stores on their services and all offer family plans for monthly rates that all look rather familiar and similar. 

Clearly, then, Spotify has seen podcasts as a unique selling point and as a means to be firmly in a channel where ad growth is set to double. 

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