Spotify started podcast wars. And before it was the podcasting behemoth it is today, it built its name and reputation as a music streaming service. From a small start-up in Sweden, the company has grown to become the world’s most popular audio streaming subscription service with over 365 million users, including 165 million subscribers, across 178 markets. In this edition of The Current podcast, we hear from Jay Richman, the VP, head of global advertising and platforms, to find out why the company is betting big on podcasts (with over 2.6 million on the platform, plus this one) and how the company is thinking about improving the advertiser experience for listeners.
Damian Fowler (00:00):
I'm Damian Fowler.
George Slefo (00:02):
And I'm George Slefo.
Damian Fowler (00:03):
And this is The Current.
George Slefo (00:10):
The Current is your deep dive into the future of TV, media, and data privacy, but all explained in plain English.
Damian Fowler (00:15):
Plain English. And today we'll hear from Jay Richman. Jay is the VP Head of Global Advertising Business and Platform at Spotify. Chances are, you're listening to this podcast on Spotify, which only goes to show how bullish they are on the medium of digital audio.
George Slefo (00:31):
But before Spotify was the podcasting behemoth they are now, they were mostly known for music, and that's when Jay first joined the company.
Jay Richman (00:43):
The eight years have both flown by and it's hard for me to remember a time before Spotify. When I joined in 2013, my day to day was really all about putting out fires. The Ads Product Development team was three people, so I inherited a team of three when I joined. They were supporting an organization of 150 across sales, marketing, business development. So yeah, between firefighting and recruiting, kind of one by one I was able to recruit a really great minimum viable team. Now I basically lead a midsize thousand person organization within the larger conglomerates.
George Slefo (01:29):
You mentioned putting out fires. Is there any fire in particular that stands out to you?
Jay Richman (01:35):
Back then it was really the basics, like placing and pacing of ads, reporting and invoicing of campaigns. Advertising circa 2013 was very much an afterthought, which meant that we would ship consumer propositions first and then worry about the ad experience later. On one such occasion, this was back when we were selling homepage takeovers like big banner ads on desktop, is kind of pre-us having a mobile free tier, and we launched our web player, but failed to integrate a homepage takeover. So we had a number of very unhappy homepage takeover customers and had to work, I think it was over a July 4th break, to quickly get that format integrated.
George Slefo (02:26):
Well, it's, it's really good that you guys put in the work over the holiday weekend because as we all know, desktop is the future of advert- no, I'm kidding. So you guys were initially a music-first company, as you mentioned, and now you guys are audio-first. Like what does that mean?
Jay Richman (02:41):
So as you know, the company's roots are in music. About two years ago, we expanded the mission of the company to that of audio and have gotten into spoken word content in a really big way. We built our own content studio to produce podcasts. We acquired a number of additional ones, Gimlet podcast, so forth. We've been licensing up some of the largest shows like Rogan, Dax Shepherd, just to name a couple. Now that we've got a great mix of content between the two on the platform, we're starting to look at interesting opportunities, including monetization.
Damian Fowler (03:21):
Can I jump in here? I'm talking about spoken audio. I mean, back in the day, of course it was known as radio, but we don't call it radio anymore. That radio and spoken audio was always the poor cousin to video and film, but now podcasts have completely changed the equation. It's the podcast market I read is growing faster than any other type of ad medium. What is driving that?
Jay Richman (03:44):
On the advertising side I think what you're seeing is this great catch up effect to all of the consumer adoption over the last several years. It remains a medium where there's just this massive gap between time spent listening and ad spend in the space. It's where video was probably five years ago or so. It's where mobile was like, probably around that time. You tend to see consumers behaviors change first and advertisers catch up. I think we're at the very beginning of this catch up effect where ad spend should, at minimum, be at equilibrium with the amount of consumer attention in this space.
George Slefo (04:26):
Let me ask you this. I was on LinkedIn maybe a month ago and they show what's trending and they were saying "The podcast wars are heating up." Then you had news recently of Amazon acquiring a company and I'm sitting there and I'm like, "The podcast wars are heating up." You guys were on this years ago. Do you believe Spotify started the so-called "podcasts wars?" Because again, you guys saw this coming years ago before much of the rest of the industry or the rest of the industry for that matter.
Jay Richman (04:57):
It's funny, I guess there's two ways to look at it. One is how far ahead we are. The other is how much less runway we've had with podcasts than we had with music, because the same thing is happening as we evolve the format from downloads, or in the case of music, ownership into access and streaming. So I recall in the early days of music, wondering when the giants would awake, we had all these Game of Thrones metaphors like "Winter was coming." Now that Apple has awoken and launched and bought Beats and launched music, and YouTube now has a competing a subscription service, Amazon is bundling, right?
Jay Richman (05:43):
We're now at a point, you think about the amount of time from when we launched the service to when the giants awoke for music, and then you compare that to podcasts, even if it is a couple of years, it's like a couple of years versus 8 or almost 10 years of runway. But I think that we're going to see this rising tide effect. I mentioned before that there's just this massive gap between time spent listening and ad spend, and the more folks in the market, like banging on that point, I think the quicker we will see things catch up , and I think that will be great for the overall industry.
Damian Fowler (06:20):
Jay, you mentioned earlier about the acquiring of big name talent to bring attention, and in many ways bring listeners in, and you've cultivated big names: Joe Rogan, obviously the biggest podcaster in the world as I understand it, the Obama's, not to mention ex-royalty like Prince Harry and Hollywood royalty like Meghan Markle. And I'm allowed to say that cause I'm a Brit. But to be serious for a second, what's your strategy for acquiring talent like this? And why is that such an important building block?
Jay Richman (06:50):
Yeah it's interesting. It's one of these things where success breeds more success. We made a big splash when we acquired Gimlet, the HBO of podcasts. We fast followed with Parcast, which has amazing engagement content. Over time, we've become known as a very creator-friendly place to work and partner. I think that the kind of position that we occupy now is that we get a lot of first looks based off of reputation, similar to how Netflix does in video. The better we do, the more creators are attracted to work with us. I think we have a model that has proven to be quite, quite successful.
George Slefo (07:41):
I want to jump in and I want to talk about SAI: streaming ad insertion. But before I get into that, I was hoping you can tell our listeners what it is and why it's important.
Jay Richman (07:54):
The way podcast ads work today are much more like the billboard ads you see by the side of the highway, or ones on the subway, above a taxi, in a magazine. They're fairly analog in nature. They can't be targeted, measured, or engaged with. So it tends to appeal to the same crop of advertisers, the same advertisers that you would see sponsoring a billboard. One last bit of context: so why do all of those constraints exist? It is because ads are literally embedded into their show upon download. Nothing is done in real time, the same way a billboard is literally plastered ahead of time before a car drives by it.
Jay Richman (08:42):
So with the shift from download to streaming, it allows us to do all of this stuff in real time. It allows us to modernize the format and bring the best of digital ad tech to an otherwise analog space. So the three things, now that you have the context, that SAI brings to the table is real-time targeting based on audience, it offers measurement, which among other things, verifies impressions that the ad is actually heard, which is something that has not existed, and interactivity: the ability for a consumer to actually engage with the ad as opposed to how they do so today, which is recalling a coupon code and entering it into a browser.
George Slefo (09:24):
I want to ask you, what is something that most advertisers get wrong when it comes to audio advertising?
Jay Richman (09:31):
On the advertiser side the experience is totally broken because they don't know who they're reaching, they don't know the efficacy of their ads. There's no way for consumers to engage with their brand, so that side of the equation is broken. Whereas, I think that the actual experience from the consumer side is quite good. I think that I guess advertising has done a lot of things right, as it relates to the creative and the nativity between the host and the spot. I think that preserving that on the listener side while improving the advertiser experience is going to be the secret sauce on what advertisers tend to get wrong. They tend to think that they could take their radio playbook and bring it to digital and expect it to work.
Jay Richman (10:22):
That's problematic for two reasons. One, the creative often doesn't neatly cut over 15 or 30 second spots designed for an analytic experience tend to not work well in a highly interactive environment like streaming. Two, it fails to take rich advantage of all of the digital capabilities: the ability to target outside of a geography, the opportunity to engage, which basically doesn't exist in analog radio, and knowing how to measure the return on their investment. These are all things that, for new time audio buyers, we're having to teach
Damian Fowler (11:04):
On that point, what do you recommend to advertisers who want to create native audio for the first time? Obviously the in-podcast experience is very seamless at the moment when it's read by the host, but we're talking about something different here. How do you go about cultivating that kind of native audio experience?
Jay Richman (11:22):
By its nature, the answer to that question isn't one size fits all. There's a tension between nativity and standardization. You've got to try to find that sweet spot. If at one end, you've got host-read, which is kind of the most native kind of endorsement you can get, at the other end, you have radio-style spots built for a completely different medium. In the middle we think that there's something really interesting to be done around voice talent and various voice talent services. That's an area where we're spending quite a bit investing both in-house and through partnerships.
Jay Richman (12:02):
I think matching the brand's goals to the right host, to the right shows, and building the spots is something that we're having to assist the market with, but we're seeing some really good early traction. Because it's so new, it's a solution, not a problem, to most agencies, if that makes sense. Having a platform like Spotify be as involved in the creative production for a mature market would probably be seen as somewhat competitive to the industry, but as we try to onboard more brands and agencies really don't know how to build stand out, they're actually looking to us to provide that consultative service, so that's what we're kind of doing. That's the stage that we're in. We're helping through hands-on in hopes of educating the market such that it can take off on its own.
Damian Fowler (12:56):
Just for the record, George is very interested in being cultivated as a voice talent. So just put that out there.
Jay Richman (13:02):
That's great. Yeah, that's great to know.
George Slefo (13:04):
I don't think anyone wants to hear me speak more.
Jay Richman (13:07):
I'm sure we can find a brand that differs. Maybe even one for this podcast.
George Slefo (13:10):
I just want to shift gears here just a little bit when it comes to some of the acquisitions that you guys have made. You guys made an acquisition with Megaphone, you made an acquisition with Anchor. How does that help Spotify achieve its goals? And what does that do for content creators at the same time? Can you put that in perspective? Because those were two key acquisitions you guys have recently made.
Jay Richman (13:36):
Yes. Earlier we talked about some of the content acquisitions. Those two are platform acquisitions, and you can kind of think about them solving the same problem, but at opposite ends of the spectrum. They're both hosting distribution and monetization platforms. Anchor focused on emerging creators, Megaphone focused on enterprise publishers. So together, we feel like we've got tools and services that span the spectrum, and that's resulted in the Spotify Audience Network - I think you were calling it SAN, we internally call it SPAN here - is basically our play to aggregate all of that inventory into a single marketplace where advertisers large and small can market to our consumers on shows large and small. Anchor represents kind of the tail and torso, Megaphone represents the head, and along with Spotify's owned and exclusive content. All of that is being aggregated into one supply source for advertisers to be able to reach audiences across and for creators to opt into monetization.
George Slefo (14:53):
How does Spotify Audience Network differ from other audience networks? Like something like a Facebook audience network? Like what do you guys bring to the table that's different from other audience networks?
Jay Richman (15:04):
Spotify Audience Network, just to explain to the audience, represents our aggregation of Spotify owned and exclusive shows, enterprise publishers on the Megaphone platform, and emerging creators hosting through Anchor. Bringing all of that together for advertisers to be able to buy audiences across is what the Spotify Audience Network represents. So you have the largest of shows, like Joe nativity, to small DIY creators all available for the smallest of advertisers in the D to C space, to the largest of brands, all being matched together for the very first time in audio via the Spotify Audience Network.
Jay Richman (15:54):
So I think one of the things that makes the Spotify Audience Network so compelling is that for smaller creators, we're offering monetization for the very first time. I think I mentioned earlier, we've got 2.6 million shows on the platform, the vast majority of which go on monetized today. By allowing them to be bundled and sold on an audience basis were able to extend monetization to many more creators than would ever be possible. And on the enterprise side, we're able to increase, sell through rates, and raise CPMs by having them be part of this larger marketplace, resulting in larger checks for the enterprise community. So it's really exciting to see both ends of the market growing in tandem.
Damian Fowler (16:44):
This is really important for podcast creators in the ecosystem. We talk a lot here at the trade desk about how important ads are for building out journalism at a healthy ecosystem. What does it mean? Why is it important for Spotify to cultivate new podcast creators? We're not talking about the big names here, but people who are doing this out of their own home. Why is that important? And what do you anticipate going forward, in terms of a podcast wave of new voices?
Jay Richman (17:12):
That's a great question. We've got now over 2.6 million podcasts on the platform, the vast majority of which go un-monetized today. So we see a big opportunity to bring monetization to the un- or under-monetized. I think the benefit of that is it'll allow creators to invest more in their art and that art will delight our consumers to an increasingly great degree, which will again, grow the pie for, for all. And so we very much think in ecosystem terms when we develop and hopefully you can see that in the model. We effectively have for the very first time, the entire audio stack in one platform. You've got creation tools, distribution capabilities, monetization in multiple flavors, playback and access to the end consumer.
Jay Richman (18:14):
When you put it all together, it creates opportunities for innovation that just simply aren't possible when you're having to span all of those offerings across multiple stacks. So we've brought it all together. We're kind of in the early integration phase of it all. I think it's going to result in an explosion in creation. I think that that explosion and creation is going to create a lot more economic value for the entire ecosystem.
George Slefo (18:46):
What trends were born from the pandemic? Do you believe they'll stick around once the world returns to normal? Like what do you think changed that's going to stay the same now?
Jay Richman (18:58):
I'll give you one on the consumer side, one on the advertiser side. On the consumer side, we saw this massive behavioral shift from mobile usage to desktop and console usage. Gaming overall was a pandemic beneficiary and listening to music while gaming as one of those things that a lot of our consumers discovered while spending time at home, and I think that that's going to persist. Now that folks are returning in developed healthy countries to largely their old ways we're seeing mobile usage started to pick up as you'd expect, in-car usage starting to pick up as you'd expect. But now that this multi-device opportunity has been discovered, I think it's going to persist. So I think that's a behavioral shift on the consumer side.
Jay Richman (19:53):
On the advertisers side, one of the things that became super critical was agility during the pandemic. That's actually one of the areas where audio and audio advertising really shine because on a dime, brands needed to retool their strategy, their messaging, and in a very, very dynamic environment. Stores were closing, stores were opening, how do you get the message out? And as it turned out, creating highly produced video spots, which required being on location, et cetera, was really negatively impacted in a way that audio production wasn't. So we really leaned in to being nimble and available to our partners in their time of need. We're able to produce spots way more cheaply, way more quickly, and way more relevant. I think that that's going to persist as a value proposition. I think that's one thing that I think we'll ask for each.
Damian Fowler (20:56):
That's it for The Current. Stay tuned because next week we'll have Josh Brandau, the CMO of the Los Angeles Times.
Josh Brandau (21:02):
It's our job to provide the largest possible audience with ways to engage with us that are the most meaningful.
George Slefo (21:11):
The Current is produced by James T. Green and Kiarra Powell. Gretta Cohn is our executive producer. Rick Kwan is our mix engineer. Our theme is by Loving Caliber. The trade desk team includes Cassie Crosby, Ivan Sikic, and Kat Vesce. The Current is a production of Transmitter Media.
Jay Richman (21:29):
And remember, there's a tension between nativity and standardization and you got to try to find that sweet spot.
Damian Fowler (21:39):
I'm Damien.
George Slefo (21:39):
And I'm George.
Damian Fowler (21:40):
And we'll see you next week.