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Insider: Spotify strikes $20 million podcast advertising partnership with Omnicom

The deal begins this week, and runs through to the end of the year.

This development marks a notable forward for Spotify’s efforts to substantiate its ad tech machinations, at the very least because it opens up a pipeline for Spotify to get a steady flow of ads to run and test across its emerging podcast advertising products.

Omnicom, by the way, is one of the largest advertising holdings firms in the world that manages about $35 billion in global media spend every year, and it serves major clients like PepsiCo, McDonald’s, and State Farm through its various media-buying agency businesses. Which is to say, while $20 million sounds big, it’s more experimental chump change for the holdings company, though it is nonetheless a get for Spotify looking to validate its pod ad tech efforts.

A few threads to keep in mind —

(1) The Wall Street Journal’s write-up with:

It isn’t the first plan for significant spending ahead of time for the fast-growing podcasting industry. iHeartMedia Inc. has been handling much of its podcast sales through upfront negotiations for almost a year, according to Conal Byrne, president of the company’s iHeartPodcast Network.

But advertisers typically sponsor individual series when it comes to podcasts, where advertising is growing rapidly but remains relatively small.

The emphasis being the building of an on-platform marketplace. This is somewhat of a non-sequitur, but I imagine that if there are to be any more chatter on Spotify acquisitions moving forward, I reckon it’s more likely that we’ll see an advertising or ad tech-related pick-up, as opposed to another content company. Just a thought.

(2) From the press release I received about this: through this deal, Omnicom clients “will have first-mover access to the platform’s exclusive podcast content.” Which is to say, this arrangement will drive advertising only towards Spotify originals and exclusives on the platform, at least for now.

Of which there are many on the way, need I remind you. Tie those all together — the upcoming Joe Rogan exclusivity, the Warner Bros/DC Comics stuff, the Kardashian Parcast show, the Higher Ground stuff, the Paul Bae stuff, the Jordan Peele stuff, and so on — and hook it up to the recent product announcements, like the interactive ads piece and the video piece, and you can begin to see the web of what the Spotify podcast advertising universe feel like a few years from now. YouTubification? Maybe.

Anyway, I thought The Verge’s Ashley Carman had an interesting read on a possible macro-effect of this specific development:

This might be the start of podcast budget reallocation to Spotify. From what I can tell, these companies haven’t pulled ads from Facebook during the boycott, but still, it’ll be interesting to watch how ad spend changes with Spotify working on its podcast ad tech.

Again, my sense is that this is more experimental than anything else, but that doesn’t negate Ashley’s read, particularly if this hefty trial run ends up producing intended results.

I also saw some chatter about the fact that these ads are limited to Spotify programming, and how it seems indicative of something that they are keeping those possible advertising gains to themselves at this juncture. I’d reframe the observation: this being an experiment, I reckon the company wants to keep things simple at this point by using their own stuff as the guinea pig first. The long-term intent seems pretty clear to me — they’d want to open these advertising products and ad dollar pipelines up for third-party content at some point in the future.

On a related noteHere’s a dissenting view on Spotify’s podcast gambit, courtesy of Bloomberg Opinion. It argues that the company’s podcast efforts — while currently valued positively by investors — ultimately won’t by itself be able to solve its biggest problem: the fact that it still has to pay a major slice of its revenues to the record industry for royalties.

The piece emphasizes that advertising is “still likely to remain a small slice of total revenue,” and so whatever gains it can get through pure podcast advertising dollars will still probably not be enough to off-set the load.

Big picture, though: I think it’s fairly clear, at this point, that podcasting represents a stepping stone for Spotify towards its so-called broader “audio-first” strategy. In addition to riding the growing podcast advertising revenue wave, the company also seems interested in the other non-music audio categories: talk radio and audiobooks.

As a side note… I keep noticing Amazon being evoked in these general write-ups of the big podcast picture. Am I the only person who’s unconvinced that there’s any “there” there?

Another thing to consider… Spotify may very well be the buzziest (and most technologically interesting) of the at-scale podcast advertising competitors, but they’re not running in an open lane. As alluded to in the Wall Street Journal piece, iHeartMedia is continuing to serve as another suitor for ~Big Podcast Advertising Dollars~, and with the Stitcher deal in process, SiriusXM will be another player in that competition as well.

Indeed, the only major pushback that I got for my analysis of the Stitcher-SiriusXM deal — specifically, my characterization of their podcast efforts as being “piecemeal” so far — was the notion that SiriusXM has actually been pretty good on the monetization side, particularly through the acquisition of AdsWizz. I mean, sure, but there’s a reason I didn’t talk about podcast monetization in the analysis: you can’t monetize audiences you don’t have. And with Stitcher, I suppose you can say they’re about to actually get podcast audiences too.

That said… To my knowledge, the SiriusXM-Stitcher deal has actually closed yet. Keep an eye out.

Stray thought… It’s kinda weird to me that, in the general write-ups about the Stitcher-SiriusXM deal, there’s tremendous emphasis on Stitcher the App, as opposed to Stitcher the Overall Business. I suppose that rebrand effort didn’t end up going as smooth as one would’ve hoped.