Spotify celebrated its 10th birthday in October — making it, by modern measures, a veteran tech company, long past the scrappy startup phase of existence. It’s gotten there by being very good at knowing what it does best. Now, to reach the next stages of profitability and long-term success, it has to amplify all that.
The Swedish streaming service announced in a memo on Monday that it will begin allowing advertisers to sponsor its signature Discover Weekly playlist, which refreshes every week with custom history- and preference-based song recommendations for every user. The new sponsorship’s in-playlist and native ads, which will be delivered to all users on the free tier, will kick off with a series from Microsoft tied to the software company’s “Empowering Us All” artificial intelligence campaign.
Spotify already offers brand sponsorships on some of its other editorial playlists, but until now it has kept Discover Weekly — which is heralded by both fans and competitor services as its flagship feature, and draws more than 40 million users a month — a more organic, unfettered experience. Yet the popularity of the playlist (i.e. the money in it) is irresistible in terms of revenue opportunity. (Despite explosive user growth and subscription-tier revenue, high royalty payouts and low free-tier ad revenue still make Spotify unprofitable overall.)
Per Spotify’s memo, people who regularly listen to Discover Weekly stream twice as much as people who don’t. “Our new Discover Weekly ad experience positions advertisers for success and ensures that our fans are hearing messages that embody the ethos of discovery,” said Spotify’s global partner solutions head Danielle Lee in a statement. “Personalization has quickly gone from a nice-to-have to an expected consumer experience that delights audiences and marketers are craving opportunities to be part of it.” The company’s tech industry head Casey Weinreich added: “Spotify is a technology company. The magic with this partnership is we were able to identify a tech partner with a shared ambition to utilize technology, in this case machine learning, to enrich our user experience.” According to Microsoft executives in the memo, the debut campaign will focus on messaging about how AI influences a number of industries including philanthropy and healthcare.
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While most of Spotify’s ads are programmatic (appearing as sidebars or in allotted boxed spaces like traditional ads on websites), the Discover Weekly brand sponsorship, which is currently in beta testing, will be open to native homepage takeovers and full playlist takeovers, the company said. Spotify, now that it’s almost a year out from its public debut on the New York Stock Exchange last spring, has to make good on its promise to make more money — which is especially crucial as its market price slumped amid a tech industry slide from a peak $35.3 billion in July to $22.7 billion in December. Its choice to do that by loaning out the audience of its most beloved product, though, has some wondering whether the service might be sacrificing some of its charm along the way.