How Spotify is ‘removing friction’ to pursue the long tail
The Media Leader Interview
Spotify’s UK Europe sales chief discusses how its ad Exchange, generative-AI tools and an improved measurement offering are part of a strategy to make advertising with the streaming giant frictionless.
What does Spotify hear most from advertisers?
“Make it as easy as possible for us to buy, to create ads and to measure their efficiency and effectiveness,” according to UK and Northern Europe head of sales Ed Couchman.
To that end, this month Spotify unveiled a slew of new features, including the launch of its own ad exchange, generative-AI creative tools and new first-party measurement solutions, all with the aim of not only addressing existing clients’ needs, but to also appeal to brands in the long tail curious to expand their planning into digital audio.
“Each one of the products we’ve built helps remove friction at each stage to make Spotify an even more enticing place for them to place their media investments,” Couchman tells The Media Leader.
Three doors for advertisers
Couchman, who worked previously at Snap and Meta, argues that the launch of the Spotify Ad Exchange (Sax), as well as the pre-existing Spotify Ads Manager (Sam), sets the streaming giant apart from other tech platforms’ ad models.
“I’ve worked at a couple of other platforms and those platforms basically made you walk through one door to buy that inventory with a self-service platform,” he explains.
“We’re saying: you can walk through one of three doors.”
Door number one, according to Couchman, is working with a sales representative to buy direct. Door two is Sax, while door three is Sam, both of which are programmatic.
“The fact is we’re much more neutral, allowing advertisers to choose which door they want to walk through and then building tools and systems behind each of those doors,” he continues. “I think that’s a very important difference from some of the other platforms.
“We are a big platform, but we’re not a walled garden. Advertisers have choice with Spotify. They don’t always have choice with the other platforms about how they buy.”
Moving down the funnel
Historically, Spotify’s ad revenue has primarily been driven via direct ad buys, especially for brands pursuing upper-funnel marketing strategies aimed at improving awareness and consideration. Couchman calls it “classic audio advertising” — “low-cost, effective reach and low production barriers to entry for the creation of ads”.
But with Sax and Sam, Spotify is now able to “move down the funnel into performance”, “from consideration into purchase and retention”.
This is also thanks to new generative-AI creative tools, which enable advertisers to create scripts and voiceovers for their Spotify ads at no added cost. While humans will be checking such ads for quality assurance, Couchman argues that AI ad reads have improved dramatically in recent years, making for “compelling” listening.
“At the moment we’re working with, what, 10,000 advertisers?” he estimates. “What this does is enable us to open up to many, many multiples of those advertisers — importantly, both large and small.”
New advertisers Couchman believes Spotify will be able to attract include digital-native direct-to-consumer brands, such as those in the app economy or mobile gaming.
Such brands are keen to understand outcomes-based key performance indicators and Spotify has rebuilt its ads manager to allow such digital-first advertisers to optimise campaigns towards app-install objectives and direct-to-website traffic.
Meanwhile, Spotify’s first-party measurement tool Spotify Brand Lift has also been rebuilt to provide more accurate brand metrics for those looking to measure more upper-funnel criteria. Likewise, Spotify also retains in-house creative consultancy Creative Lab to service such clients.
“[We’re] helping to create at both ends of the spectrum, and then clearly draw a straight line between ad exposure on Spotify and media efficiency and effectiveness,” says Couchman.
“I think the fact that we’re doing it all at the same time gives us this huge step change and huge advantage.”
Podcasts and vodcasts ‘pivotal’ to Sax
Moving forward, Couchman will be measuring Spotify’s commercial success by the extent to which it increases the number of active and retained brands advertising on the platform, as well as growing the platform’s share of total adspend.
In the company’s latest earnings, ad-supported revenue grew 7% year on year. According to Spotify, total ad revenue has, however, more than doubled since 2020, with Sam revenue accounting for 50% year-on-year growth in Q4 2024.
Apart from the long tail, Spotify also appears well-positioned to benefit from uncertainty over guidance relating to the advertising ban on less healthy foods. The Advertising Standards Authority and Committee of Advertising Practice are currently revising guidance on the ban, which is set to come into effect on 1 October, after legal advisors warned that brand advertising may be included in the scope of the restrictions.
CAP to revise LHF guidance over lack of clarity on brand advertising
The uncertainty has caused brands with LHF products to embrace media channels that are explicitly exempt from the ban, including podcasts and digital OOH, for brand advertising efforts.
According to Couchman, Spotify is “particularly seeing [LHF brands] really lean in to us”, including the likes of Mondelez International and Mars.
He adds: “We’re seeing a large amount of brands saying: ‘If we can get digital audio right, it’ll be a real competitive advantage for us.'”
While Sax only launched this month with music inventory, podcasts will be added “imminently” — The Media Leader understands this to mean by the end of this year at the latest.
That includes adding video inventory into the ad exchange — something that Couchman calls “absolutely pivotal” to Sax’s success.
“We’ve seen this change in consumer behaviour on the platform wanting more visual-based experiences,” he explains.
“I think it’s important that our ad solutions match.”