Spotify ad business has room to grow—if it can capitalize

Ahead of Spotify reporting its third-quarter earnings this afternoon, here’s a little recap of what the platform has been up to over the past few months. Plus, our thoughts on the moves.

Listen in: Last month, Spotify launched audiobooks in the US, making more than 300,000 audiobook titles available to users for purchase.

Our take: It’s a smart move for Spotify to wait and see how popular audiobooks will be before bringing advertisers on board. But if the service resonates with consumers, it won’t be long before Spotify tries to monetize it.

A step up: Spotify may soon add a Platinum tier to its subscription options, according to a survey sent to a user after they canceled their Premium subscription.

  • The tier would include hi-fi audio, a headphone tuner, and limited-ad Spotify podcasts, among other features, for $19.99 a month.

Our take: Spotify’s subscriptions represent a large majority of its business, so adding an option that caters to its most music-obsessed users makes sense. But at $10 more than the Premium subscription, does the Platinum option offer enough features to get consumers to trade up?

Ad wars: Ad revenues grew 31% in the second quarter, making up 13% of Spotify’s total revenues, a record high for the company.

  • Despite an “up and down” ad business in the third quarter, the company remains bullish on its advertising opportunities.
  • CFO Paul Vogel also hinted that Spotify may build out measurement and attribution tools to help make advertising on the platform easier.

Our take: There’s money in audio advertising, and Spotify has its eye on the ball. We forecast that Spotify’s ad revenues will increase nearly 50% this year, totaling $1.15 billion this year and $2.13 billion by the end of 2024.

This was originally featured in the eMarketer Daily newsletter. For more marketing insights, statistics, and trends, subscribe here.