Spotify's Misadventures in Video Continue
It may be time for a much bolder move if the company really wants to become a serious ad player
Amidst a string of strong tech earnings announcements, Spotify had a rough quarter the other day.
While there were many reasons for that, advertising was a letdown. According to CNBC, “advertising-supported revenues declined about 1% to 453 million euros from 456 million euros a year ago.”
“The main point to emphasize is that in ‘25 we are recalibrating the ads business,” said CEO Daniel Ek during an earnings call. “We are behind on the plan and we have high expectations across our businesses and we need to see more progress in ads and that hasn’t happened.”
Here’s what might be the problem - how many recalibrations is this so far?
After an initial focus on subscriptions (the Netflix of music), Spotify started to get more serious about advertising back in 2011 (thanks AllthingsD), and even rolled out its first video ads back in 2014. Since then:
A year later, Spotify put on a big show for advertisers, hosted by the stars of Broad City touting video deals with Viacom and ESPN
In 2016: Spotify Expands Video Offering With 12 Original Series
In 2018: Spotify Retools Content Strategy With a Pivot Away From Video
In 2022: Spotify Shares Our Vision To Become the World’s Creator Platform
In 2023: Introducing Clips, Spotify’s answer to short form
In 2024: Spotify’s New Pivot: We’re a Big Video Creator Platform Now, Too
And finally this year: Spotify touts GenAI ads and its ad exchange at its first upfronts-style presentation
At a certain point, the pivots become harder to buy into, and as a platform, you sort of are what you are. 15 years after its US launch, Spotify boats 276 million subs, and is the go-to listening app for folks at the gym, jamming playlists at parties, and listening to podcasts in the car. A “daily habit” for many, said analyst Rich Greenfield - albeit one that has translated to a limited advertising business thus far - despite loftier ambitions.
“I think that we are very proud to own the background,” said Chloe Wix, Head of Global Product & Commercial Growth at Spotify, on my podcast about a month ago during an episode we shot at the Spotify Beach in Cannes.
“We have for a very long time. Two things can be true. When you own the background you have this opportunity [to engage more] and one of the things that we've really become that essential daily companion to the end user. That allows you to be present for moments in their day. It is a long-term relationship.”
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“Creators alike have this expectation,” Wix added. “That they have the opportunity to engage with us in a deeper way…Spotify is a platform for creators first and foremost.”
There’s that C-word again. It sure feels like Spotify glommed onto saying Creators as the Creator Economy hype started to intensify, and the power of creators (mostly YouTubers and TikTokers) became undeniable - in culture, and advertising.
But you can’t just say you’re ‘for creators’ and suddenly Mr. Beast, Dude Perfect, Charli D'Amelio and a bunch of ‘Get Ready With Me’ stars ditch YouTube for Spotify. Just like you can’t say you’re a video app when you’re not.
(Btw, Spotify has made huge strides in innovative audio advertising - and audio ads are underrated in our industry! The company should for sure lean into making it easier to make, buy and measure the impact of audio ads - and own it.
Yet they’re the ones who keep talking about video. What I’ve never understood is why Spotify inked these exclusive deals with the likes of Joe Rogan and Bill Simmons, but then let them distribute their shows everywhere - and eventually let them build up huge video audiences over time - on YouTube.
Part of this I suspect comes from the top. When a company is built around tech, and the vast majority of its revenue comes from something other than advertising, it’s hard to develop a strong understanding of that business, or treat it like a priority. I’ve heard this from ex Spotify ad execs. It sort of reminds me of the role advertising long played at the Windows-dominated Microsoft back in the day.
At this point, Spotify would seem to need to go much bolder to both shift user behavior (very hard) and advertisers’ perceptions. For one, while The Spotify Beach at Cannes was surely impressive, I’m not sure why there wasn’t a big upfront in New York this past spring featuring Rogan, Simmons and others on stage.
Here’s a wild suggestion - could Spotify buy, or challenge - Vevo? The music video streaming service is a joint venture between the major record companies, which would surely make such a deal uber-complicated. But then again, Vevo has long relied on its dependence/distribution on YouTube, much to the chagrin of many executives, who have pushed for more control via a Vevo CTV app and various Fast channels.
What if Spotify was able to become the exclusive home of music videos. It would surely be costly, but a Vevo alliance would:
Help make Spotify a true video consumption destination
Get Spotify on the TV screen, and into TV advertising
Make it far more appealing to bigger brands
And also, dent YouTube/Google in the process.
This is probably an insane idea. But what’s another wild pivot at this point?
“The premium subscription service and the advertising business are both really
meaningful parts of us furthering [our mission],” said Wix. “For us, yes, advertising in terms of the overall focus perhaps in the public sphere has been a little bit smaller than the focus on premium. But I think some of the investments that we've made over the last couple of months have definitely started to demonstrate to the contrary and really show the world how committed we are to the ad side of the house.”