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Spotify to acquire Megaphone

The Swedish audio streaming platform announced the move this morning, stating in the official press release that it has “entered into a definitive agreement” to buy the podcast hosting platform currently owned by Graham Holdings. The deal is expected to come in at around $235 million, pending review, according to a person familiar with the matter, and employment offers are expected to be made to all current Megaphone staffers.

This acquisition doesn’t quite come out of nowhere, as Spotify has been using Megaphone to support at least some of its original programming portfolio for some time now. Also worth noting: Joel Withrow, the former Director of Product at Megaphone, joined Spotify in early 2019, and currently serves as a Group Product Manager at the company.

Megaphone was once known as Panoply Media, originating as a podcast-focused sister company spun out of Slate in February 2015. That early incarnation saw Panoply spread out across multiple lines of businesses: content production, ad sales, and hosting technology. As competition in the podcast space grew more intense, the company pivoted towards specifically focusing on hosting and ad tech in fall 2018, divesting from the content business as a result. Panoply officially rebranded as Megaphone in early 2019. (Full disclaimer: I worked at Panoply for a brief stint, well before it became what it is today.)

Part of modern Megaphone’s big pitch revolves around its Targeted Marketplace product, which was built to provide advertisers with better audience targeting, more granular measurement capabilities, and greater inventory scale, all of which were enabled by dynamic ad insertion. All these features relate to long-standing problems for podcast advertisers, and with that in mind, you can see what’s driving the thinking behind this deal: Spotify is acquiring Megaphone to advance its podcast advertising and monetization interest, currently anchored by its Streaming Ad Insertion (SAI) technology, and the pick-up would put the Swedish audio streaming platform in a stronger position to reshape the podcast advertising business as they see fit.

“What Megaphone represents is a big play for scale,” said Jason Richman, Spotify’s VP of Global Advertising Business and Platform. The SAI initiative was originally announced during CES at the top of this year, and had up until this point only been applied to Spotify’s original programming portfolio and made open to advertisers in limited capacity. Richman tells me that SAI inventory has since been sold out, and part of what Megaphone brings to the table is the ability to help Spotify increase that type of inventory and generate more returns on the advertiser front. Furthermore, integration between Spotify’s SAI technology and Megaphone’s Targeted Marketplace technology isn’t expected to produce much friction; as Spotify was already a Megaphone client, there had been some optimization towards the former’s needs and preferences beforehand.

The combination of these two distinctly scale and targeting-oriented podcast advertising solutions will probably unnerve some traditionalists who have long argued that podcasting’s relatively high-touch, analog, and friction-filled nature is part of what makes its default advertising product effective. What follows from that argument, then, is the notion that increased targeting, measurement granularity, and ad inventory management ease could fundamentally ruin what made podcast advertising great — and make it as screwed up as the rest of digital advertising.

I asked Richman about his thoughts on this, and of course, he disagrees. “It presupposes that the ad experience is going to get worse for the consumer, which is a premise I don’t buy,” said Richman. “We’re not operating from a position of ‘here comes programmatic advertising!’ but from a position of trying to fix problems while preserving what’s great about podcast advertising.”

Anyway, directly following from this acquisition, I’m told that Megaphone clients will now have access to SAI inventory. Whether or not all those Megaphone’s clients will stick around through the transition remains to be seen — in particular, I’d be curious about iHeartMedia, which has been a Megaphone client since January 2019. I’m sure there’ll be a lot more to shake out from this institutionally, and we’ll keep track of the details as they play out.

The steady drumbeat of consolidation in the podcast business continues. This development comes not long after SiriusXM’s acquisition of Stitcher, which was completed in October. That arrangement uses AdsWizz for podcast advertising, and my only major association with that platform is being served a yelling radio-style ad for a truck dealership three zipcodes away.